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GLOBAL
The ECB Governing Council, meeting on 10th March decided to reduce the rate on funds kept by banks to 0.40%, a decrease of 10 basis points. In a significant move bond purchases were enhanced by twenty billion Euros to eighty billion. Importantly, the ECB would buy corporate bonds as well. Further the bank announced a new series of long term loans to help banks would starting from June.
"The Governing Council expects key interest rates to remain at present or lower levels for long period of time and well past the horizon of our net asset purchases," Draghi, ECB President said. Based on the current view, "we don't anticipate it will be necessary to reduce rates further."
Draghi lowered the outlook for economic growth in the Eurozone area from 1.7% to 1.4% in 2016, while stating that he expected growth in 2017 would be 1.7%, less the previously forecast growth of 1.9%. Inflation in 2016 is expected to be just 0.1% plunging from the earlier estimates of 1%. The ECB clearly is worried about deflation setting in.The euro rose 0.6% to $1.1067.
The Federal Reserve Chair, Janet Yellen indicated that rate increases if any would only be gradual in the coming months and years. With oil prices still low, inflation will likely continue to be below the Fed target rate of 2%., she opined Further, given the risks to the outlook due to global problems, she said, "I consider it appropriate for the Committee to proceed cautiously in adjusting policy." Clearly the Fed is in no mood to increase rates anytime soon. (RTT News, 29th March, 2016)
US
Manufacturing - US manufacturing activity expanded in March, beating forecasts and following five straight months of decrease. The Institute of Supply Management, ISM, said in a report that the March Purchasing Managers Index, PMI, ascended to 51.8 compared to the reading of 49.5 in February. Any figure above the 50 mark indicates growth.
The increase in manufacturing was bolstered by the solid growth in new orders, with the index surging to 58.2 in March from 51.5 in February. Similarly, the index for industrial production was 55.3 in March, climbing from 52.8 in the previous month.
The inflation index leaped to 52.5 in March, from 38.5 in February. This indicates higher prices for raw materials, the first time in nearly sixteen months.
"Manufacturing registered growth in March for the first time since August 2015, as 12 of our 18 industries reported sector growth, and 13 of our 18 industries reported an increase in new orders in March," said Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee.
Consumer sentiment - The US Consumer sentiment index was down slightly in March, a report by the University of Michigan said. The March reading was 91.0 in contrast to the higher reading of 91.7 in February.The current economic conditions index slipped from 106.8 in February to 105.6 in March.
Labour - In March there were contradictory signals on the labor market. Non-farm jobs grew 215000 jobs in March. Yet the unemployment rate moved up to 5.0%, from 4.9% in February.In March, the manufacturing sector lost 29,000 jobs, on the back of which employment index declined 0.4 points over the month to 48.1. Retail, health care and construction sectors witnessed good growth in jobs, enough to offset the loss in manufacturing jobs. However, since the labor force increased by 396000 people, the overall unemployment rate saw a slight increase. Hourly wages, an increasingly important component of the Federal Reserve's analysis matrix, inched up to $25.43 in March from 25.36 in the earlier month.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "As far as the Fed is concerned, both the doves and the hawks can take something from this - wage growth remains muted, yet employment growth remains strong. Furthermore, we suspect it is the inflation figures rather than the labor market data that will determine the timing of the next interest rate hike," he added. "We expect the Fed to move next in June." (RTT News, March 1, 2016)
EUROPE
Eurozone Inflation - Consumer price inflation dropped again in March in the Eurozone.Prices fell 0.1% on an annual basis in March, after declining 0.2% in February. The saving grace is that the core inflation, stripped of energy and fresh food prices,and increased 1% after increasing 0.8% in February. Economists had expected an increase of 0.9%.
Food, alcohol and tobacco prices increased 0.7%, while non-energy industrial prices grew 0.5%. Services prices jumped 1.3%, even as energy prices plunged 8.7%, on an annual basis.
Still overall inflation is well below the European Central Bank, ECB's, inflation target of 2%, leading to fears of deflation. Indeed experts expect inflation to remain close to zero for the major part of the year.
Eurozone Manufacturing - In March, though European manufacturing grew at a faster pace than expected, nevertheless it saw the lowest rate of expansion inthe last one year, a report from Markit revealed. The factory Purchasing Managers Index inched up to 51.6 in March from 51.2 in February. The reason for the disappointing performance can be traced to the poor performance in France and Germany.
The German PMI in March was up 0.2 points to 50.7 in March, the second lowest increase in nearly sixteen months. Manufacturing in France declined to 49.6 in March after a score of 50.2 In February. The score of 50 indicates the point of expansion and contraction.
"The data suggest manufacturing grew by only around 0.2 percent in the first quarter, acting as a drag on the wider economy," Chris Williamson, chief economist at Markit, said.
GERMANY
German Employment - Unemployment in Germany held steady in March after declining for five months. The unemployment rate was 6.2%, the Federal Labour Agency said, the lowest since the reunification of Germany. The number of unemployed people remained static at 2.73 million, while it had fallen by 9000 in February.
German Retail Sales - Retail sales in Germany dropped 0.4% in March on a monthly basis, while analysts had predicted a 0.4% increase. The last such decline was in August.
German Economic Growth -The Bundesbank said that German economic growth was expected to slow in the second quarter due to weaker business expectations and stagnating industrial orders. The economy grew at 0.3% in the third and fourth quarters of 2015.
UK
UK Manufacturing Growth - British manufacturing growth in March was disappointing, as the Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index for manufacturing rose a paltry .02 points to 51.0. Analysts were expecting a reading of 51.2.While new domestic orders increased, export orders fell. Manufacturing employment too declined. Input prices continued their decline while manufacturers cut their sales prices to accommodate competitive pressures.
"Though the overall index showed a rise, the marginal increase will fuel concerns around strong supply chain continuity and any further impacts from major economic challenges such as the results of the Brexit vote," David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement &Supply, said. (RTT News, March 1, 2016)
ITALY
Italian Manufacturing Growth - Italian manufacturing in March recorded the fastest growth in three months, according to Markit Economics. The Markit/ADACI Italy Manufacturing Purchasing Managers' Index climbed to 53.5 in March after posting a reading of 52.2 in February, a twelve month low. The expansion was pushed by strong growth in new orders from both the domestic and export markets. Employment in the sector increased.
"However, demand was partly boosted by the lowering of output charges, which showed the largest monthly fall in over a year in March, as falling input prices provided manufacturers with yet more scope to slash tariffs," Phil Smith, a chief economist at Markit said.
ASIA
AUSTRALIA
Australian Economy - Australian consumer prices increased 1.7% annually in March. This is less than the 2.1% increased witnessed in February.
Building approvals slipped a seasonally adjusted 9% in February according to the Australian Bureau of statistics.
Retail sales was below expectations in February, even though sales of household goods increased 0.4%, clothing, footwear and personal accessory sales grew 0.1% and departmental stores sales increased 0.4%, overall sales remained flat.
JAPAN
Japanese Monetary Growth - Japan's monetary base expanded at a brisk 28.5% in March 362.605 trillion yen, after posting an increase of 29% In February. Current Account balances grew 39.6%, while bank notes in circulation advanced by 6.7%. The adjusted monetary base gained 20.6%.
Japan Business Sentiment - The Bank of Japan Tankan survey revealed that business sentiment in Japan slipped in the first quarter. This survey is important since it is used by the Bank of Japan to formulate policy. The large manufacturers' index dipped to 6 in the first quarter, while the reading was 12 in previous quarter. The large manufacturers' outlook index too fell to a reading of 3, below the reading in the fourth quarter of the earlier year.
Other sectors like retail, real estate, construction too saw declines. The non-manufacturing index, dropped from 25 in the previous quarter to 22 in the first quarter. The index to measure outlook fell from 18 in the earlier quarter to 17 in the first.
CHINA
China Manufacturing - In March, Chinese manufacturing declined the least in over a year, as the Caixin manufacturing PMI advanced 1.7 points to 49.7. A reading below 50 indicates contraction. The official PMI showed a rosier picture as the reading came in at 50.2 in March climbing from 49 in the earlier month. The official non-manufacturing PMI posted a reading of 53.8 in March, compared to 52.7 in February. Increase in new orders pushed the growth in output. Firms were able to charge higher prices in March, even as input costs climbed.
The pickup could reflect the effect of government measures to revive the economy, according to economists. He Fan, chief economist at Caixin Insight Group, said. "However, considering that current conditions remain uncertain, the government needs to continue with moderate stimulus measures to reinforce market confidence."(RTT News March 1, 2016)
INDONESIA
Indonesia Manufacturing - Indonesia's manufacturing witnessed it first growth in seventeen months in March, according to survey results by Nikkei and Markit.The seasonally adjusted PMI advanced from 48.7 in February to 50.6 in March. A reading above 50 indicates growth. The increase was pushed by an increase in new orders, while there was no change in employment. Input prices rose a little in March, a reflection of low inflation.
INDIA
Indian Manufacturing Growth - India's manufacturing sector grew for the third straight month in March,and at the quickest pacesince July. Growth was prompted by strong demand.
The Nikkei/Markit Manufacturing Purchasing Managers' Index, PMI, climbed 1.3 points to 52.4 in March. This is the third month for which the reading has been above the 50 mark which indicates growth. The new orders sub-index, which serves to measure domestic demand, grew to an eight-month high to 53.9 in March, from 52.3 in February. Foreign demand expanded more modestly. The strong demand gave firms the pricing power to increase prices at the highest pace in nearly sixteen months. This has served to make up for growing input prices.
Retail inflation still runs slightly above the Reserve Bank of India's target rate of 5%.
"Inflationary pressures in manufacturing are on the upside, with cost burdens rising," said Pollyanna De Lima, an economist at Markit. "This build-up in inflationary pressures may lead the Reserve Bank of India to hold off from cutting rates, especially as solid growth was seen." (Reuters, April 4, 2016)
However Indian Business sentiment witnessed a fall for the first time in the New Year in March. The MNI India Business Sentiment Indicator, which measures current sentiment of BSE listed companies dropped to 62.7 in March from 63.5 in the earlier month. The dip was caused by manufacturing firms. In contrast, service sector firms and construction businesses were more upbeat about the business environment.
"The decline in confidence in March was relatively modest and sentiment is still up from the recent trough in December. Importantly most key measures in the survey have stabilised and turned upwards in recent months following the trend decline that has been in place since September 2014," Chief Economist of MNI Indicators Philip Uglow said. (Economic Times, Mar 29, 2016)
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