Euro-Area Manufacturing Accelerates as Orders Fuel Optimism
Euro-area manufacturing expanded at the strongest pace in over six years as factories across the region took on more workers to deal with surging orders. A Purchasing Managers’ Index climbed to 57.4 in June, up from 57.0 in May and above a June 23 flash estimate, IHS Markit said on Monday. Growth rates improved in most of the surveyed countries, including France and Italy, while a gauge for Greece signaled expansion for the first time since last August. “There’s no sign of the impressive performance ending any time soon,” said Chris Williamson, chief business economist at IHS Markit. “Optimism about the year ahead has risen to the highest for at least five years, backlogs of orders are building up at the fastest rate for over seven years and factories are reporting near-record hiring as they struggle to deal with the upturn in demand.” The figures underline rising confidence among policy makers that the recovery in the 19-nation economy is strengthening after years of subdued activity and muted inflation. Unemployment data on Monday showed joblessness held at 9.3 percent in May, the lowest level since March 2009. With factory output rounding off the best quarter since 2011, overall economic growth in the three months through June is likely to have received a strong boost from goods production, IHS Markit said.
China factories recover in June, growth fastest in three months
China’s manufacturing engine cranked back into growth mode in June, expanding at the fastest pace in three months after unexpectedly contracting in May, as new orders and production rose in a sign of a modest recovery, a private survey showed on Monday. Yet, even as markets welcome the recovery in factory activity, firms showed a reluctance to restock as business confidence slumped to the lowest for the year amid a government crackdown on debt risks and tightening financial conditions. The Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) rose to 50.4 in June, above the 50-point mark that separates growth from contraction on a monthly basis. That was well above the 49.5 level forecast by 25 analysts in a Reuters survey, and up from May’s reading of 49.6, the first contraction in 11 months. Improved orders helped nudge activity into expansionary territory, even though firms surveyed noted demand still remained relatively subdued both in domestic and international markets. Total new orders rose to 51.0 – the highest level in three months – from the previous month’s 50.3, with new export orders also rising. The rate of expansion in production also quickened in June, and the pace of job shedding – which has been persistent since late 2013 – eased to the slowest in three months.
Dollar off lows but still wobbly as hawkish central banks help peers
The dollar edged off from a nine-month low against a basket of currencies on Monday, but it remained shaky as signs central banks in Europe were moving away from accommodative monetary policies kept the euro and sterling well supported. The dollar index against a group of six major currencies was 0.1 percent higher at 95.729, crawling off a nine-month trough of 95.470 plumbed on Friday. The greenback was hit hard last week as hawkish comments from central bankers increased expectations that the European Central Bank, the Bank of England and Bank of Canada would eventually shift to tighter monetary policy. The dollar added 0.1 percent to 112.435 yen after briefly falling to 111.900 earlier before climbing back quickly. The dip was seen as a knee-jerk reaction to Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party suffering a historic defeat in an election in the capital Tokyo on Sunday, signalling potential trouble ahead for the premier.