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Wednesday, November 02, 2011

Eurozone PMIs Out

I'm still catching up with my reading here after being powerless for days.

Eurozone October. Look at the country table on the right of the page - Ireland is the only one still expanding! Greece is at 40.5, Spain and Italy are in the 43.X range, France, Austria and the Netherlands are all 48.X, and Germany is hanging in at a relatively strong 49.1. Still, it's intimidating. German unemployment rose very slightly. Article. German PMI hints why this is so; export orders were down sharply. More dire is the detail; German manufacturers are still accumulating finished inventory, which means they have further down to go. French manufacturers aren't on the whole.

Really not good for the Eastern bloc; much of that is dependent on German manufacturing orders. Poland's manufacturing PMI improved in October, but look at the big fall over the last few months. Export orders continued in the contraction zone. Russia improved in October to 50.4, although that's not strong, employment is declining, and cost pressures remain.

Italy is getting hit hard, with manufacturing unemployment accelerating. The huge fall in manufacturing PMI from September to October is accompanied by price cuts, etc, 48.3 in September to 43.3 in October?

Oh, yeah, the EFSF is delaying its bond sale. Not the time, they say.

Indian manufacturing PMI, which had come close to stagnation in September, improved heartily in October. But employment is falling and prices are rising; it remains to be seen whether this improvement will be transitory. This index had been dropping hard for months, and finished goods stocks are dropping, so I think they have another couple good months ahead. Harvests should be injecting money into rural areas and boosting domestic demand.

Chinese HSBC manufacturing PMI improved, although only to low levels for China. New export orders increased. Taiwan is well into contraction. South Korean manufacturing continues in the contraction zone, though I am hoping it bends up a bit over the next two months to get close to neutral. I think it will due to the impact of the Thai floods. Japanese manufacturing PMI seemed to be bouncing around the neutral zone the last few months, but I think Thai floods and power problems will have some negative impact.

Manufacturing in North America is doing decently, but the strong Brazilian contraction continues.

US Fed is expected to announce some sort of QE program or that it shortly will do some sort of QE, so commodity prices in USD are off and running for the gate. September CPI-U was 3.9% unadjusted, so I think it is a suicidal dash. The Fed cannot afford to boost CPI by another two percent, because it will put the economy into a hard, sustained contraction as real incomes fall further below real minimal living costs. Adding another 10 million people to the food stamp rolls is not the way to boost the US economy and the Fed probably realizes this.

Further, it is too soon after Operation Twist was announced for another program to be announced. It would make the Fed look lunatic, and the Fed won't do that.

And the world waits for the U.S. to spend our way back to prosperity.

I agree that another round of unmanaged QE will land at the doorstep of the CRB (after the FIRE sector gets their cut, of course). These simplistic monetarists pushing NGDP targeting better be careful what they wish for.

Its time for bold and decisive action on the part of the elected class to do something. Fat chance as they run for cover!

Sal M.
Oh, the elected class is bent on being the worst it can possibly be.
The elected class gets their cut first. They'll only do QE3 when they're long gold (and other hard stuff) and fewer of us are. There are too many December gold call options outstanding right now. There's no edge for them. They like a good 8:1 or 10:1 payoff, none of this penny ante even money or even 2:1 retail stuff. Watch out for the EU zone scare, followed by the US spending cut/tax increase scare, followed by Dec Gold options expiration on November 22nd. December 13th is the next FOMC meeting, if these guys (and women) have their positions on, Hilsenrath in the WSJ will tip Bernanke's hand the week before. If the odds aren't good enough, they'll wait for early next year. Either way, there's one more big score coming before the next election. It's them vs us, they make the rules, and they could care less about us (ethanol anyone?). Just my 2 cents...thank you MOM for the continued help and clarity!
Anon PA
Well, we've dragged it out a lot farther than I had feared at the beginning of this year.

There is much ruin in a nation.
This comment has been removed by the author.
Anon PA - I laughed over Leadman Sach's proposal that the Fed target nominal GDP. That would be a nice guaranteed trade for the leadmans, but would kill the Main Street economy so brutally that we'd face another Great Depression.

The Fed really needs to be much more careful about how it presents its targets - last year they veered into almost saying that they were simply going to boost asset prices, and the recent yammer emanating from WS pundits over the deflation terror is simply a move to try to get the Fed to do it again.

If the Fed does it again, the Fed will be dead in three years.

The Leadman Sachs bright idea came up in the Bernanke presser - I got the idea that Bernanke is learning to be a bit more of a politician, and that the Fed is not going to push inflation.

Therefore I believe that the commodities bling is just bling.

India's food inflation index is up over 12% as of this week. There's a lot of inflation in the mix worldwide, and a huge amount of loose money looking for a home. The expectation that the Fed will act if commodity prices drop too much will prevent commodity prices from dropping much, so there ain't gonna be a QE3 very soon.
Hi MOM. You must be very remote to have that big a power outage.

Leadman Sachs? Best match I could find for that is a Dutch goldbug site:


I understand the Sachs bit, why Leadman?

The Fed swansong on QE sounds beautiful, fading at increasing intervals.
Gold. Lead.

A bit leaden.
Hi again MOM, I hope and pray you're correct. Ever since QE2, I feel like the character in the movie The Great Outdoors that keeps getting hit by lightning. Just a little skittish I guess. Thanks again for all your help and insight.
Anon PA
GS is doing too badly to be Goldman any more.

Shtove, the east coast got hit hard by a sudden and heavy October storm which loaded up the trees with ice and snow while they still had their leaves. The result = catastrophe. I think some folks in CT are still out.

This can happen any where. GA is generally better, but a freak ice storm in the south can knock power out for quite a while also.
" Leadman Sachs? ... I understand the Sachs bit, why Leadman? "

then the enlightenment

" Gold. Lead. "

= = = = =

shtove: I think that tucked into the gold/lead play on words is a reference to the old alchemists' quest to turn lead into gold. So you've got both the concept of "value/worthless" and also a sideways reference to the idea that "we CAN make something from nothing".

As I've said before, isn't the English language wonderful?
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