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Economic Indicators

China’s Oct factory activity expands more quickly, but output weighs – Caixin PMI

BEIJING (Reuters) – China’s factory activity expanded at its fastest pace in four months in October, buoyed by stronger demand, but power shortages and rising costs weighed on production, a business survey showed on Monday.

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China's Oct factory activity expands more quickly, but output weighs - Caixin PMI
© Reuters. FILE PHOTO: Containers are seen at a port in Ningbo, Zhejiang province, China May 28, 2019. REUTERS/Stringer

BEIJING (Reuters) – China’s factory activity expanded at its fastest pace in four months in October, buoyed by stronger demand, but power shortages and rising costs weighed on production, a business survey showed on Monday.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 50.6 in October — its highest level since June. Economists in a Reuters poll had expected the index to remain unchanged from September at 50.0. The 50-mark separates growth from contraction on a monthly basis.

China’s economy is slowing after an impressive rebound from the pandemic-driven slump early last year, with its sprawling manufacturing sector hit by COVID-19 outbreaks, higher costs, production bottlenecks, and more recently, power rationing.

A power crunch triggered by a shortage of coal, tougher emissions standards, and strong industrial demand has led to widespread curbs on electricity usage, hurting factory output.

A sub-index for output showed production shrank for the third consecutive month and at a faster rate than in September.

An official survey on Sunday showed China’s factory activity contracted more than expected in October to shrink for a second month.

The Caixin survey, which focuses on smaller, export-oriented firms in coastal regions, showed domestic demand was stronger as local COVID-19 cases dwindled, but foreign demand remained sluggish as the pandemic raged on in other countries.

A sub-index for new orders rose to 51.4 from 50.8 in September, while new export orders shrank for a third straight month.

“To sum up, manufacturing recovered slightly in October from the previous month. But downward pressure on economic growth continued,” said Wang Zhe, senior economist at Caixin Insight Group.

“Supply strains became the paramount factor affecting the economy. Shortages of raw materials and soaring commodity prices, combined with electricity supply problems, created strong constraints for manufacturers and disrupted supply chains.”

Input prices rose at their fastest pace since December 2016, partly due to increasing energy and transport costs, while factories cut jobs for the third straight month, albeit at a slower pace than in September, according to the survey.

To help struggling manufacturers, China’s cabinet announced on Wednesday that the government will defer some taxes for manufacturers for three months from November.

China’s economic growth is likely to slow to 5.5% in 2022 from an expected expansion of 8.2% this year, a Reuters poll showed. The economy expanded by 9.8% in the first three quarters of 2021 from a year ago.

Wang from Caixin Insight Group warned that a new wave of COVID-19 outbreaks in many central and western regions since late October could deal a fresh blow to economic activity.

“It is critical to balance the goals of controlling the outbreaks and maintaining normal economic activity,” said Wang.

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Economic Indicators

Italy says can exceed 3.1% growth target for 2022 despite energy prices

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© Reuters. FILE PHOTO: People walk along the Galleria Vittorio Emanuele II shopping mall in Milan, August 25, 2015. REUTERS/Flavio Lo Scalzo

ROME (Reuters) – Italy’s Treasury said the country’s economy could grow this year by at least as much as Rome’s official target of 3.1% set in April, despite the negative impact of surging energy prices.

Italy grew 0.1% in the first quarter from the previous three months, national statistics bureau ISTAT said last month, revising up a preliminary estimate of a 0.2% contraction.

This left Italy with so-called “carryover” growth of 2.6% this year, assuming gross domestic product was flat in the remaining three quarters, ISTAT said.

Announcing on Monday the bond issuance programme for the third quarter, the Treasury said it expected growth to accelerate in the second quarter, compared with the first three months.

This still makes it plausible to reach or exceed the 2022 growth target of 3.1%, it said in its debt issuance report.

Prime Minister Mario Draghi’s government in April revised down its 2022 economic growth forecast to 3.1% from a 4.7% projection made last September.

The government has budgeted since January more than 33 billion euros ($34.90 billion) to soften the impact of sky-high electricity, gas and petrol costs.

($1 = 0.9456 euros)

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Economic Indicators

French consumer confidence falls more than expected in June

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© Reuters. A woman shops at a fruit and vegetables shop in Paris, France, June 10, 2022. REUTERS/Sarah Meyssonnier

PARIS (Reuters) – French consumer confidence fell more than expected in June, hitting a near nine-year low as concerns about the economic outlook surged in the face of high inflation and political uncertainty, a survey showed on Tuesday.

The INSEE official statistics agency said its consumer confidence index fell to 82 in June from 85 in May and the lowest level since July 2013.

A Reuters poll of 14 economists had an average forecast of 84 with the lowest estimate for 83.

Although households’ concerns about future inflation remained well above the long-term average, they eased in June for the third month in a row.

However, household sentiment about the general economic outlook continued to worsen, falling to the lowest level since May 2020 when France was in the second month of its first and most strict COVID-19 lockdown.

While surging inflation has stressed households in recent months, France’s political situation has added to uncertainty about the economic outlook since President Emmanuel Macron’s party lost its ruling majority in legislative elections this month.

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Economic Indicators

Peru truckers, farmers to strike over fuel and fertilizer costs

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© Reuters. FILE PHOTO: People walk next to parked trucks during a national transportation strike against fuel prices, in Lima, Peru March 18, 2021. REUTERS/Angela Ponce/File Photo

By Marco Aquino

LIMA (Reuters) – Peru’s truckers and some farm groups will go on strike on Monday after failing to reach agreements with the government seeking measures to reduce the impact of steep global price rises of fuel and fertilizer, sector leaders said on Sunday.

Union leaders met on Friday and Saturday with government representatives, with demands including considering freight transport a “public service” that would reduce costs and curb competition from truckers from neighbor countries.

“We are firm in plans to strike with all our bases nationwide,” the leader of the heavy load haulage and drivers union Marlon Milla told radio station RPP. The union has 400,000 cargo transport units in 14 of the 25 regions of the country.

High global fuel prices linked to Russia’s invasion of Ukraine have stoked unrest in Peru, the world’s No. 2 copper producer, while shortages of fertilizer have raised fears over food supply with the government struggling to secure shipments.

The government of leftist President Pedro Castillo, who has seen his popularity tumble since taking office last year, has taken measures to curb the rising cost of living, but the annual inflation rate remains at around 8%, its highest level in 24 years.

Some farming unions also announced strikes on Monday, in protest at the rise in fertilizer prices and shortages.

Latin American leaders are grappling to bring down spiraling prices despite major interest rate hikes. Trucking protests over fuel costs have hit Argentina while Ecuador is being roiled by protests in part linked to gas prices. [L4N2YB27W]

“The dialogue has not been exhausted, we are in a permanent session of ministers to avoid protest,” Justice Minister Félix Chero told reporters on Sunday. The government is offering subsidies for road tolls and fertilizer costs.

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