Friday, December 3, 2010

Top 5 Economics Graphs of the Week - 4 December 2010

This week we look at the US PMI results; while also reviewing the China PMI data for November. Then we check out the 3rd quarter GDP results for Australia, before wrapping up with a closer look at some US data on the housing market, consumer confidence, and the nonfarm payrolls report.

The US manufacturing PMI came in at 56.6, a little below consensus 57 and previous 56.9, the non-manufacturing PMI matched consensus at 55.0, and increased vs October's 54.3 reading. So between manufacturing and services there was a bit of variation, also within the results the manufacturing sub-components were not great e.g. falls in new orders, production, employment, exports. But within the services sub-indices there was a bit more positives e.g. rises in new orders, new export orders, employment, etc. So overall the results are generally positive, and not really surprising given where the US economy is at.

2. China PMI
Over to China, the official PMI rose to 55.2 from 54.7 in October; beyond expectations for 54.8. The HSBC Markit index rose to an 8 month high of 55.3 from 54.8 in October. The standouts in the sub-indices were Production (58.5 vs 57.1), Supplier Delivery (48.9 vs 49.3), New Orders was basically flat, but still strong (58.3 vs 58.2), similarly Employees was little changed (52.0 vs 52.1). In general its good to see the index rising, its also positive to see it still in the expansionary zone, and it will give comfort to those watching China's attempt at a managed slowdown as inflation pressures rise.

3. Australia GDP
The Australian economy grew 0.20% q/q in the September quarter, placing Australian GDP up 2.7% year on year. The pace of growth was slower than the expected 0.40% q/q growth, as global volatility, exchange rate pressures on exports, and withdrawal of fiscal stimulus measures took their toll on the Australian economy. Looking forward though the pace of growth is likely to rebound in 2011 as the resources sector surges ahead with a number of large scale mining projects in the pipeline, and farming continues to contribute; and of course the flow on effects to the rest of the economy.

4. US House Prices and Confidence
Two key pieces of data release last week were the Case-Shiller house price index, which showed house prices falling further (no surprise). The other key data point was the Conference Board Consumer Confidence index, which showed a jump to 54.1 (vs consensus 52, previous 50.2). Within the confidence numbers, the present situation index rose to 24 from 23.5 and the expectations index jumped to 74.2 from 67.5 previously. So people are feeling a little better about the future, but just not so much about the here and now. And looking to the housing market, the future may be better, but the short-medium term probably has further downside risk unless the fundamentals sharply turnaround.

5. US Nonfarm Payrolls
The US added 39k nonfarm payrolls in November, vs 151k in October, and well below consensus 168k. Private payrolls were up 50k vs 159k in October. Average hourly earnings were flat, as was the average work week. So overall not a great result, good that it was positive, but basically it lines up with the idea that the US recovery is not going to be linear, and basically that there is going to be choppiness as the US economy muddles through the next year or two.


So we saw the manufacturing PMI in the US still strong, but with some negatives in the sub-components, the services PMI however was a bit stronger and relatively more promising. Meanwhile in China the manufacturing PMI improved, showing that the concern is rightfully more about the risks of overheating rather than not growing. In Australia, the economy continued to grow, but a little less so as stimulus wore off, but expect the slowdown to be temporary. Back to the US, the housing market is still under the gun, but the consumer is slowly feeling a bit better about the future, in spite of the job market also remaining relatively subdued.

1. Institute for Supply Management & Yahoo Finance
2. CFLP & Markit/HSBC & National Bureau of Statistics
3. Australian Bureau of Statistics
4. Conference Board & Standard & Poors
5. Bureau of Labour Statistics

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