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Lacklustre global PMIs stoke stagflationary fears

Earlier today, S&P Global released much-awaited Purchasing Managers’ Index data for several major economies. These data summarize whether surveyed…



Earlier today, S&P Global released much-awaited Purchasing Managers’ Index data for several major economies.

These data summarize whether surveyed purchasing managers believe business activity is expanding, contracting or staying the same. They tend to reflect changes in market conditions – an improvement, deterioration or unchanged.

Readings over 50 suggest that business activity is picking up, i.e., an expansion compared to the previous month, while below 50 indicates a contraction.

Overall, August PMIs have proved softer than in July, and have fallen below consensus expectations in many cases, suggesting the possibility of a significant slowdown in Q3.

Primarily, sustained inflationary pressures, geopolitical stresses and continuing rate hikes have dampened consumer demand leading to a contraction in private sector business activity and accelerating inventory accumulation.


Manufacturing PMI continued to expand to 54.5 although it slowed from 55.7 in July. Underlying demand was shaken by historic levels of inflation, while the downside may have been limited by workers returning to work after an extended period of strict lockdowns.

Despite falling commodity prices, manufacturing PMI fell to a 12 – month low.

Services and composite PMI both fell below 50 to 7-month lows, reaching 49.6 and 49.8 from 50.9 and 51.1 in July, respectively.

Continued hikes by the central bank amid a 21-year high in inflation are beginning to curtail consumer demand and further tightening will likely aggravate the slowdown.    


The composite PMI in Japan registered a disappointing decline to 48.9, against July’s 50.3, and significantly undershot a forecast of 50.6 by Trading Economics. 

The Manufacturing PMI fell to 51.0 in August. Although hinting at a mild increase in business activity, this is a 19-month low for the island country, having registered an expansion of 52.1 in the previous month.

The loss in orders to the private sector was the first such instance in six months signalling potentially dark days ahead for the economy.

Services sector activity contracted for the first time in five months following weak demand, with the PMI Services falling deep into a contraction at 49.2 versus last month’s tepid expansion of 50.3 and a forecast of 50.5.


The S&P’s composite index fell to 49.8, an 18-month low, moderating from a bullish 51.7 in July 2022.

Flash Services PMI clung to positive territory, just barely, having fallen to 51.0 from 53.2 in last month’s reading.

As in most countries, demand conditions were dragged down due to high inflation and rising interest rates, deterring discretionary spending.

Accordingly, PMI Manufacturing fell from 49.5 to 49, although it outperformed the consensus of 48.2 as reported by Trading Economics.

Expectations that the ECB will continue its normalization policy in September will likely lead to a tough winter for French citizens and a prolonged slowdown.


The S&P’s composite index fell to 47.6, a 26-month low, easing from 48.1 in July 2022.

This reflects the grave energy problems Berlin has been facing recently, as gas prices surged and new complications emerged with a key pipeline passing through Kazakhstan being damaged overnight.

Both PMI Services and PMI Manufacturing remained in contractionary territory registering 48.2 and 49.8 in August 2022.

Although below 50, the PMI manufacturing was somewhat of a relief for policymakers, improving from 49.3 in the previous month, and well above consensus estimates of 48.2 as reported by Trading Economics. The improvement was primarily driven by the alleviation of supply chain issues in parts of the sector.


PMI Manufacturing Flash across the Eurozone contracted to a 26-month low while the Composite PMI recorded a 16-month low, following weakness in business activity across major economies such as Germany and France, raising fears of a bloc-wide negative GDP in Q3.

Composite PMI Flash fell to 49.2 from last month’s 49.9. PMI Services saw a near stagnation at 50.2 easing from 51.2 in July and was below the consensus of 49 as reported by Trading Economics.

Manufacturing PMI was registered at 49.7, nearly unchanged from the previous month’s 49.8.  Of scant consolation would be that this was above the consensus forecast of 49. New orders have been consistently declining while inventory build-up has brought business activity to a halt.

With energy security concerns being paramount, Eurozone consumer confidence data released earlier today contracted by 24.9 in August 2022, rising by 2.1 points compared to a historic low of (-)27 registered in July 2022. This is the sixth consecutive month that consumer confidence has been in the negative 20s territory. Demand for services is expected to continue weakening.

Given the fresh data, ING economist Bert Colijn expects the euro area to be moving into a “recession quickly if it’s not already in one.” 

With natural gas prices surging and the continuing uncertainty due to the Russia-Ukraine war and drought conditions at the Rhine, further tightening by the ECB is set to squeeze purchasing power and lead to further depreciation of the Euro against the greenback.

Great Britain

The S&P Manufacturing PMI Flash crashed, registering a contraction at 46, the lowest level since May 2020 during the first wave. This registered far below July’s reading of 52.1.

“Higher costs, weaker demand and bottlenecks” sunk manufacturing to its lowest since the start of the pandemic.

Composite PMI Flash registered a muted expansion of 50.9, moderating from last month’s 52.1, and below consensus estimates of 51.1.

The main drag on the economy came from the anaemic manufacturing sector which accounts for only 9.7% of GDP, and 7.3% of all jobs as of March 2021.

The services sector, the mainstay of the British economy, contributes 78% to GDP, saw an expansion in Services PMI Flash to 52.5, although this was a moderation from July’s 52.6.

With inflation in the double digits and forecasts by the Bank of England predicting this could reach 13% during the winter, all indications appear that the British economy may be slipping towards a painful and gloomy stagflationary phase.

Citi Bank has forecast a more dire 18% inflation by January of 2023, particularly given the loosening of energy price caps during the winter.

Annabel Fiddes, Economics Associate Director at S&P Global noted that customer demand, labour shortages and raw material bottlenecks deeply hampered manufacturing.

Although weakened, the UK services PMI was a positive surprise, falling only a touch from 52.6 to 52.5 against expectations of 52. However, given prevailing conditions, the expansion is likely to be short-lived.

Source: Trading Economics


Despite inflation easing somewhat in July, and prices at the gas pump retreating to below $5 following lower commodity prices, the August Composite PMI Flash registered a devastating contraction to 45, well below already pessimistic market estimates of 49, according to Trading Economics.

This pullback from July’s reading of 47.7, added to the gloom around the US economy amid the Fed’s hawkish tone.

Market commentators will be eagerly listening to Governor Powell’s comments during Friday’s Jackson Hole meeting to see if this contraction could weaken the Fed’s resolve to continue its policy normalization.

Although above the market estimate of 51.1, the preliminary manufacturing PMI flash eased to 51.3 compared to the previous reading of 52.2.

A November 2020 study by the U.S. Bureau of Labor Statistics found that manufacturing contributed to 12.8 million jobs just before the pandemic.

The service sector absorbed the brunt of the country’s economic woes, with a deep contraction to 44.1, compared to the previous month’s reading of 47.3.

PMI Manufacturing, PMI Services and PMI Composite dropped to 25-month, 27-month and 27-month lows.

Source: Trading Economics

Siân Jones, Senior Economist at S&P Global Market Intelligence stated that the US private sector looked in bad shape with inflation dampening consumer spending and constraining upstream demand. Moreover, filling vacancies has become increasingly challenging.

Although inflation did ease, high prices remain robust and it is unclear if CPI has indeed peaked.

In all likelihood, global economies will likely have to face gloomy days ahead, particularly in light of rising interest rates.

Jerome Powell’s remarks on Friday will be key to deciphering the Fed’s next move and identifying relevant risk catalysts for the remainder of the year.

The post Lacklustre global PMIs stoke stagflationary fears appeared first on Invezz.

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Global Wages Take A Hit As Inflation Eats Into Paychecks

Global Wages Take A Hit As Inflation Eats Into Paychecks

The global inflation crisis paired with lackluster economic growth and an outlook…



Global Wages Take A Hit As Inflation Eats Into Paychecks

The global inflation crisis paired with lackluster economic growth and an outlook clouded by uncertainties have led to a decline in real wages around the world, a new report published by the International Labour Organization (ILO) has found.

As Statista's Felix Richter reports, according to the 2022-23 Global Wage Report, global real monthly wages fell 0.9 percent this year on average, marking the first decline in real earnings at a global scale in the 21st century.

You will find more infographics at Statista

The multiple global crises we are facing have led to a decline in real wages.

"It has placed tens of millions of workers in a dire situation as they face increasing uncertainties,” ILO Director-General Gilbert F. Houngbo said in a statement, adding that “income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained.”

While inflation rose faster in high-income countries, leading to above-average real wage declines in North America (minus 3.2 percent) and the European Union (minus 2.4 percent), the ILO finds that low-income earners are disproportionately affected by rising inflation. As lower-wage earners spend a larger share of their disposable income on essential goods and services, which generally see greater price increases than non-essential items, those who can least afford it suffer the biggest cost-of-living impact of rising prices.

“We must place particular attention to workers at the middle and lower end of the pay scale,” Rosalia Vazquez-Alvarez, one of the report’s authors said.

“Fighting against the deterioration of real wages can help maintain economic growth, which in turn can help to recover the employment levels observed before the pandemic. This can be an effective way to lessen the probability or depth of recessions in all countries and regions,” she said.

Tyler Durden Mon, 12/05/2022 - 20:00

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Unprecedented Liquidations Lead To Historic Collapse In Investors’ Oil Exposure

Unprecedented Liquidations Lead To Historic Collapse In Investors’ Oil Exposure

By John Kemp, senior market analyst

Portfolio investors sold…



Unprecedented Liquidations Lead To Historic Collapse In Investors' Oil Exposure

By John Kemp, senior market analyst

Portfolio investors sold petroleum heavily for the third week running as fears about disruption to crude oil flows from the price cap on Russia’s exports receded.

Hedge funds and other money managers sold the equivalent of 42 million barrels in the six most important oil-related futures and options contracts over the seven days ending on Nov. 29.

Sales over the three most recent weeks totalled 190 million barrels, more than reversing the 169 million barrels purchased over the previous six weeks in October and early November. As Bloomberg adds, money managers have trimmed positioning in Nymex crude for three weeks in a row. A breakdown of the data show the drop in positions is mostly from money managers cutting long exposure, rather than an abrupt short-covering.

In the latest week, sales were again concentrated in crude (-40 million barrels), especially Brent (-39 million), with only insignificant changes in other contracts.

Brent is the contract with the most direct exposure to the crude exports from Russia subject to the price cap announced by the United States, the European Union and their allies on Dec. 2.

Fund managers cut their net position in Brent to just 99 million barrels (6th percentile for all weeks since 2013) last week from 238 million barrels (50th percentile) on Nov. 8.

Bullish long positions outnumbered bearish short ones in Brent by a ratio of just 2.17:1 (11th percentile), down from 6.74:1 in late October (76th percentile).

The long-short ratio is the lowest for two years since November 2020, before the first successful coronavirus vaccines were announced a few weeks later.

Fears the price cap would reduce global crude supplies appear to have prompted a wave of buying in both physical and paper markets throughout late September and early October.

Precautionary buying drove front-month Brent futures up to a high of almost $99 per barrel on Nov. 4 from just $84 on Sept. 26. It also helped keep the futures market in a steep six-month backwardation.

But as it became clear the cap would be set at a relatively high level, with a relaxed approach to enforcement, this buying has reversed, causing prices and spreads to fall sharply.

With the risk from the price cap removed, for now investors’ attention has returned to the weak outlook for the economy and oil consumption in 2023.

Tyler Durden Mon, 12/05/2022 - 14:21

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The Gall Of Lockdowners Who Support China’s Anti-Lockdown Protests

The Gall Of Lockdowners Who Support China’s Anti-Lockdown Protests

Authored by Michael Senger via ‘The New Normal’ Substack,

If the intent…



The Gall Of Lockdowners Who Support China's Anti-Lockdown Protests

Authored by Michael Senger via 'The New Normal' Substack,

If the intent was to get western elites to simultaneously support totalitarianism in their own countries while pretending to oppose it in China, then Xi Jinping has certainly made his point...

Across the political spectrum, voices have risen up in support of the Chinese people who’ve launched protests of unprecedented scale against the Chinese Communist Party’s indefinite Covid lockdown measures.

As well they should. Even by Chinese standards, the lockdowns that Xi Jinping pioneered with the onset of Covid are horrific in terms of their scale, their duration, their depravity, and the new totalitarian surveillance measures to which they’ve led. Anyone who participates in a protest in China runs a risk of being subject to cruel and arbitrary punishment. For ordinary Chinese people to brave that risk in defiance of this new form of inhuman medical tyranny is an act of courage worthy of admiration.

There are notable exceptions to the otherwise widespread support the protesters have received. Apple has been silent about the protests, and had the gall to limit the protesters’ use of a communication service called AirDrop in compliance with the CCP’s demands, even as it threatens to remove Twitter from its app store over Elon Musk’s free speech policy. This comes even after Apple has long ignored requests by FCC officials to remove the Chinese-owned app TikTok from its app store over unprecedented national security concerns. So Apple complies with requests by the Chinese government, but not the United States government. Let that sink in…

Apple is, unfortunately, far from alone in its CCP apologism. Anthony Fauci told CNN that China’s totalitarian lockdowns would be fully justified so long as the purpose was to “get all the people vaccinated.”

This kind of apologism for the CCP’s grisly bastardization of “public health” is horrific, especially coming from the man most widely seen as the leader of America’s response to Covid.

But what may be even more galling than this apologism is the widespread support China’s anti-lockdown protesters have received even among those who demonized anti-lockdown protesters in their home countries and wished their lockdowns were more like China’s.

In 2020, the New York Times denounced anti-lockdown protesters as “Anti-Vaxxers, Anticapitalists, Neo-Nazis” and urged the United States to be more like China.

But in 2022, the New York Times admired the bravery of China’s anti-lockdown protesters fighting Xi Jinping’s “unbending approach to the pandemic” that has “hurt businesses and strangled growth.”

In 2020, CNN published an open letter from “over 1,000 health professionals” denouncing anti-lockdown protests as “rooted in white nationalism” while admiring “China’s Covid success compared to Europe.”

But in 2022, CNN admired China’s anti-lockdown protesters as “young people” who “cry for freedom”

In 2020, the Washington Post denounced anti-lockdown protesters as “angry” populists who “deeply distrust elites,” and wished the United States was more like China.

But in 2022, the Washington Post celebrated global “demonstrations of solidarity” with China’s anti-lockdown protests.

In 2020, the New Yorker denounced anti-lockdown protesters as “militias against masks” while marveling at how “China controlled the coronavirus.”

But in 2022, the New Yorker admired the protesters standing up to Xi Jinping.

Earlier this year, Amnesty International issued a statement of concern about Canada’s anti-lockdown Freedom Convoy protests being affiliated with “overtly racist, white supremacist groups,” even as Justin Trudeau invoked the Emergencies Act to crush the protests.

But now, Amnesty International has issued a statement urging the Chinese government not to detain peaceful protesters.

These headlines are, of course, in addition to the hundreds of other commentators, influencers, and health officials, such as NYT journalist Zeynep Tufekci, who used their platforms in 2020 to urge for lockdowns that were even stricter than those their governments imposed, but now join in support for those in China protesting the same policies they were urging their own countries to emulate.

Etymologically, Zeynep’s latter comment makes no sense. Lockdowns had no history in western public health policy and weren’t part of any democratic country’s pandemic plan prior to Xi Jinping’s lockdown of Wuhan in 2020. Though some countries, such as Italy, imposed lockdowns shortly before the United States, their officials too had simply taken the policy from China. Thus, because no other precedent existed, any call for a “real lockdown” or a “full lockdown” in spring 2020 was inherently a call for a Chinese-style lockdown.

Though by “full lockdown” Zeynep may have intended somewhere in between the strictness of lockdowns in the United States and China, there was no way for any reader to know what that medium was; it existed only in her own head. Thus, the reader is left only with a call for a “full lockdown,” and the only example of a “successful” “full lockdown” that then existed was a full Chinese lockdown.

Zeynep’s latter comment further illustrates the efficacy of what was arguably some of the CCP’s most effective lockdown propaganda in early 2020: The ridiculous viral videos of CCP cadres “welding doors shut” so poor Wuhan residents couldn’t escape.

CCP apologists have argued that these videos prove the CCP was not trying to influence the international response to Covid, because they make the CCP look so bad. But on the contrary, the over-the-top inhumanity of the idea of welding residents’ doors shut was precisely the purpose of this propaganda campaign. The idea had to be so absurd that no decent government would ever actually try it. It thus gave the CCP and its apologists an infinite excuse for why lockdowns “worked” in China and nowhere else—because only China had ever had a “real lockdown” in which residents were welded into their homes.

When those with a decent knowledge of geopolitics or a bit of common sense see a graph like this, which looks nothing like that of any other country in the world, from a regime with a long history of faking its data on virtually every topic, the conclusion is obvious: China’s results are fraudulent. But to simple minds, a weld is a strong, durable bond capable of incredible feats, from supporting skyscrapers to spaceships. Surely, if a weld can do all that, then it must be able to stop a ubiquitous respiratory virus?

The entire concept is, of course, utterly asinine. You cannot stop a respiratory virus by indefinitely suspending everyone’s rights. But this idea that lockdowns had worked in China because the CCP had gone so far as to weld people into their homes was invoked over and over again during Covid, creating a limitless “No-True-Scotsman” out for lockdown apologists as to why lockdowns weren’t “working” anywhere except China. Whether COVID-19 cases went up, down, or sideways, the solution would always be the same: “Be more like China.”

The use of this darkly humorous propaganda campaign of welding residents into their homes speaks to two key points as to how Xi Jinping and CCP hawks like him view China’s relationship with the west. The first is that westerners will never respect the CCP; thus, you can make westerners believe anything so long as it confirms westerners’ prior belief that the CCP is barbaric.

Second, Xi Jinping sees the concepts of democracy and human rights as mere propaganda that western elites use to further their own self-interest. So long as they approve of a policy, then it’s not a human rights violation, but if they oppose it, then it is. It remains to be seen whether the response to Covid will, in the long run, ultimately advance Xi’s goal of making the world China. But insofar as the intent was to get western elites to simultaneously support totalitarianism in their own countries while pretending to oppose it in China, then he’s certainly made his point.

*  *  *

Michael P Senger is an attorney and author of Snake Oil: How Xi Jinping Shut Down the World. Want to support my work? Get the book

Tyler Durden Mon, 12/05/2022 - 15:53

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