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Markets News Afternoon: US manufacturing grows strongly in January - - construction spending fell in December; Shares rise in Europe and US
By Finfacts Team
Feb 1, 2010 - 3:53:54 PM
Economic activity in the US manufacturing sector expanded in January for the sixth consecutive month and rose to a more than five -year high, and the overall economy grew for the ninth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.
Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee, said today: "The manufacturing sector grew for the sixth consecutive month in January as the PMI rose to 58.4 percent, its highest reading since August 2004 when it registered 58.5 percent.
This month's report provides significant assurance that the manufacturing sector is in recovery. Both the New Orders and Production Indexes are above 60 percent, indicating strong current and future performance for manufacturing. This month, 13 of 18 industries reported growth, up from nine industries last month, and this is a good indication that the impact of the recovery is expanding."
Performance by Industry
The 13 manufacturing industries reporting growth in January - - listed in order - - are: Apparel, Leather & Allied Products; Textile Mills; Machinery; Miscellaneous Manufacturing; Transportation Equipment; Paper Products; Nonmetallic Mineral Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Wood Products; Fabricated Metal Products; and Plastics & Rubber Products. Furniture & Related Products is the only industry reporting contraction in January.
PMI
Manufacturing growth accelerated in January as the PMI (Purchasing Managers' Index) registered 58.4 percent, an increase of 3.5 percentage points when compared to December's seasonally adjusted reading of 54.9 percent. This is the sixth consecutive month of growth in the manufacturing sector, and the highest reading for the Index since August 2004 when it registered 58.5 percent. Prior to this recent growth trend, the PMI declined for 13 consecutive months. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the ninth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the sixth consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the PMI for January (58.4 percent) corresponds to a 5.5 percent increase in real gross domestic product (GDP) on an annual basis."
US Constructioon
The US Commerce Department that US construction spending fell to its lowest level since 2003, pulled down by a sharp fall private residential and state and local government construction.
The Census Bureau aid construction spending dropped 1.2% to $902.5 billion, falling for a second straight month. November's construction spending was revised down to show a 1.2% decline, instead of a 0.6%.
The value of construction in 2009 was $939.1 billion, 12.4% below the $1,072.1 billion spent in 2008.
Discussing the US budget, with Peter Orszag, Office of Management & Budget director and CNBC's David Faber:
Irish new car sales
The Motorcheck.ie Car Index data issued today shows that new car registrations for the month of January exceeded those recorded last year by 4.6% - - 16,612 units for 2010 as compared with 15,877 in 2009.
Commenting on the slow start Motorcheck.ie Director Shane Teskey says "Given that the majority of sales occur in the first quarter, it's a disappointing start meaning that dealers will be concerned about the total sales potential for 2010."
"Anecdotally we're hearing that an inability to source finance is still a serious problem. Although an improvement in consumer confidence and a manufacturer strategy of heavily discounting new car prices has generated significant interest in the sector, the 'finance famine' currently being experienced by new car dealers is suffocating sales" he said.
The Exchequer Revenue will be bit hit with a double blow as combined with poor sales in new cars, the number of used cars being imported to Ireland dropped 47% in January 2010 against registrations recorded for January 2009. Used cars being imported to Ireland are subject to Vehicle Registration Tax (VRT) a significant part of the tax take which has been declining rapidly in recent months.
League Table
Top of the table for 'Manufacturer' in January is Ford with 2,641 registrations. Their Fiesta and Focus models have proven to be first and second most popular with 1,060 and 922 respectively.
Diesel continues to outsell Petrol with 59% (9,768) of new vehicles registered.
B and B is by far the most common tax class with 43% (7,212) of all registrations.
Only 50 registrations separates Silver (4,070) from Black (4,020) as the most popular colour on Irish roads.
Number of firms going out of business drops by 34% in January compared with December - Underlying trend points to a high level of insolvencies in 2010
New statistics compiled by InsolvencyJournal.ie show that the number of companies that went out of business in January 2010 dropped by 34% when compared to December 2009. The number decreased from 156 (5 per day) in December to 103 in January, when approximately 3 businesses per day were declared insolvent. The figures are, however, a fifth higher than those recorded for the same period last year, confirming predictions that high levels of insolvency will continue throughout 2010.
The worst hit region was Leinster, accounting for 70% of total insolvencies with Dublin accounting for 71% of those. Ulster and Connaught were least affected with 6% and 7% respectively while Munster accounted for 17%. The findings also reveal a marked increase in the number of companies that went into receivership in the first month of the year. Receivers were appointed to 21 companies in January - - up 200% on the December 2009 figure, as banks increasingly move to have receivers appointed to recover their debts.
Ken Fennell of Kavanagh Fennell noted that “December saw a number of notable organisations such as AIB appointing receivers to recover assests linked to a large number of properties owned by the Zoe Group. A Receiver was also appointed to the Stokes brothers' private member’s club Residence. Overall, the recent findings show that construction is still the worst-affected sector, with 32 firms going out of business in January – 33% of the total. Insolvencies in the sector, however, were down significantly on previous months, dropping 35% from the December total of 49 which suggests that the industry may be over the worst.”
The results found that all other industries, bar the IT sector, recorded similar decreases in insolvency totals and there was some positive news for the services industry, which suffered 18 insolvencies in January down 42% from the December figure of 31. Despite the difficulties caused by the cold snap and the slump in trading during the January sales, there was an improvement in retail - - down 44% to 10 insolvencies, while hospitality failures almost halved from 24 to 14.
The motor trade saw some improvement in January, with only one company being declared insolvent compared to 10 in December 2009, a sign that perhaps the industry may already be benefiting from the car scrappage scheme introduced in the December budget
Creditors' Voluntary Liquidations accounted for 82% of all insolvencies last month while there were only two court appointed liquidations. January was the second consecutive month during which there were no applications for court protection granted by the High Court. This drop may be explained by demands by the High Court for higher standards in examinerships – reemphasised this month when Mr Justice Peter Kelly turned down the Stokes brothers' examinership application for their private member’s club Residence.
A first-hand account of what happened during the financial crisis, with Hank Paulson, former Treasury Secretary and CNBC's Steve Liesman:
US markets
Bloomberg reports today that evidence of a self-sustaining US recovery is emerging on the factory floors of Texas Instruments Inc. The second-largest US chipmaker will spend almost $1 billion this year to expand three factories and open a fourth to fill orders.
The need to rebuild industrial capacity after the largest decline on record in 2009 is boosting capital spending and may spur hiring. Beneficiaries are led by technology equipment- makers Intel Corp., Applied Materials Inc. and EMC Corp., as well as industrial product providers General Electric Co. and Rockwell Automation Inc.
Capital spending will increase the total productive capacity of the U.S. economy above its pre-recession level of December 2007, helping gross domestic product grow at a 2.7 percent annual rate in 2010, according to the median forecast of 67 economists in a Jan. 14 Bloomberg News survey. That would be the fastest rate since 2006.
The Dow has risen 94 points or 0.93% to 10,161.
The S&P 500 has added 1.07% and the Nasdaq has gained 0.71%.
US personal income increased $44.5 billion, or 0.4 percent, and disposable personal income (DPI) increased $45.9 billion, or 0.4 percent, in December, according to the Bureau of Economic Analysis. The savings rate rose to 4.8 per cent.
US oil giant ExxonMobil today reported that fourth-quarter profit fell 23% from a year ago to $6.05 billion.
2009 profits amounted to $19.3 billion including special items, a 57% decline from $45.22 billion from a year earlier.
"Despite continuing difficult global economic conditions, ExxonMobil delivered strong business results and built on our long-term focus,"said chairman Rex Tillerson.
Toyota will suffer a short-term loss due to its product recall, but it won't lead to a long-term loss of competitiveness, Seijiro Takeshita from Mizuho International told CNBC Monday. Sean Darby from Nomura International joined the discussion:
In Europe, the Dow Jones Stoxx 600 is up 0.18% Monday.
On the New York Mercantile Exchange, oil for March 2010 delivery is trading at $73.80 up 91 cents from Friday's close. In London, Brent crude for March delivery is trading at $72.44 a barrel.
Currencies
The euro is trading at $1.3907 and at £0.8742.
For live currency updates, check the right-hand column of the Finfacts home page.The dollar traded at a record low $1.6038 per euro on July 15, 2008.
