World Industrial Activity

80% Of The World's Industrial Activity Is Now Contracting

ZeroHedge,

5 July, 2012

Tomorrow's NFP may or may not beat expectations, following some modestly better than expected employment-related data points (then again last month NFP was again supposed to come in solidly above 100K only to cross below the critical threshold), but keep one thing in mind: with the average June seasonal adjustment being a deduction of over 1 million jobs, several tens of thousands in marginal absolute job numbers + or - will be nothing but statistical noise. 
Furthermore, with seasonality playing such a huge role tomorrow, it is quite likely that merely the ongoing seasonal giveback will result in June being yet another subpar month. 
And that does not even take into account the quality assessment of the job number, which if recent trends are any indication, will be another record in part-time jobs at the expense of full-time jobs. Yet no matter where the NFP data ends up, the following chart from David Rosenberg puts a few thousand job into perspective, showing that regardless of how many part-time jobs the US service industry has added, there is a far greater problem currently developing in the world: "We now have 80% of the world posting a contraction in industrial activity." 
This is the second worst since the great financial crisis and only matched by last fall, when in response Europe launched a $1.3 trillion LTRO and the Fed commenced Operation Twist. 
Now except the occasional rate drop out of the PBOC or modest QE expansion out of the BOE (not to mention the Bank of Kenya's rate cut earlier), there is no real, unsterilized flow of money coming from central bank CTRL-P macros to stabilize the global economy.
 Which leaves open the question: just where will the latest spark to rekindle global growth come from? And no, 10 hours a week waitressing jobs in Topeka just won't cut it.

IMF to trim global growth forecasts

The International Monetary Fund will trim its forecast for global growth this year, managing director Christine Lagarde said on Friday.

The Globe and Mail,

6 July, 2012

Without disclosing the size of the planned adjustment, Ms. Lagarde, speaking in Tokyo, said that the IMF’s current growth forecast of 3.5 per cent, due to be updated in the middle of July, is “tilted to the downside.”

“It is not an enormous variation, but it will be negative,” she said.

Ms. Lagarde pointed to near-simultaneous interest-rate cuts in China and Europe on Thursday, along with the Bank of England’s boost to an asset-purchase program , as evidence of the fragility of the global recovery.

However, she expressed hope that the ECB’s action on deposit rates in particular – cutting the interest rate on its overnight facility to zero – could help to “stimulate interbank lending, which has not been as active as it should be.”

Ms. Lagarde also paid tribute to the fiscal consolidation efforts of Japanese prime minister Yoshihiko Noda, who has succeeded in passing a bill to raise the country’s consumption tax in two stages, from 5 to 10 per cent, by 2015. “The IMF has always supported this measure,” she said. “A reasonable rate of taxation applied to a very large base is a good, solid way to address fiscal consolidation needs.”

Japan Composite PMI Contracts; China Composite PMI Stagnate

Mish's Global Economic Analysis,

6 July, 2012

The contraction hit parade keeps humming along.

Japan Composite data show first fall in business activity since November 2011

 Business activity in Japan’s service sector decreased for a second successive month during June, as new order growth remained muted.


Meanwhile, manufacturing PMI™ data showed factory output falling for the first time in six months. Consequently, the Composite Output Index (covering manufacturing and services) dipped below the neutral 50.0 threshold in June, down from 50.1 to 49.1, and indicated the first reduction in private sector activity since November 2011. Behind the latest reduction in service sector activity was a worsening of market conditions.

Some firms also commented on muted new business growth. The rate of expansion in new work was marginal, albeit slightly faster than in May. Composite data pointed to the weakest expansion of new work in the current five-month period of growth.

China Composite PMI Stagnates

Markit China Services PMI Activity Growth Eases to Near-Stagnation in June

 Key points

• Overall new business down for first time in six months

• Composite data showed input prices falling at the fastest rate in 39 months

• Service sector optimism remains subdued

The HSBC Composite Output Index posted 50.6, down from 51.9 in May, and was the lowest reading in three months. The slowdown at the composite level reflected a sharper decline in manufacturing output and a moderation of activity growth in the service sector. The latter was highlighted by the HSBC Business Activity Index falling from 54.7 to a ten-month low of 52.3 in June.

Moreover, the pace of new order growth in China’s service sector eased since the month before, with the index measuring trends in overall new work at a ten-month low. This, coupled with an accelerated decline in new orders placed at goods producers, meant that overall new work fell for the first time in 2012 so far.

Largely in response to muted growth of new business, backlogs of work in the Chinese service sector decreased for a fifth successive month during June.

The rate of decline in work outstanding remained marginal, however. Goods producers also recorded a slight rate of backlog depletion in June.

On the yen, Ms. Lagarde expressed cautious support for direct government intervention to address a “moderately overvalued’ currency.

“To the extent that macro-prudential measures have been exhausted, intervention is justifiable,” she said.