The Macro Sweep

Last updated: August 19, 2013 11:02 am

The Macro Sweep: Malaysia, Hungary, UAE

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Though the good weather and improving economic outlook has helped economies across many parts of Europe, floods have put a damper on retail sales in the Czech Republic and Hungary. Weak commodity prices are weighing on countries such as Malaysia and Russia, while services data weakened across the board in Asia. The non-oil producing private sector in Saudi Arabia and the UAE continues to expand steadily.


US: The services sector – by far the largest part of the economy – grew more quickly than forecast in July, according to a survey from the Institute for Supply Management. The ISM’s index climbed to 56 last month from 52.2 in June, comfortably beating Wall Street’s forecast of 53.1. The index has averaged 54.1 during the first six months of the year. While several of the indices that make up the headline figure increased, the employment index declined to 53.2 from 54.7.

Asia Pacific

Malaysia: Exports fell 6.9 per cent year-on-year in June, driven by weak commodity prices. This fifth consecutive month of decline reflected the plunge in palm oil prices, which dropped 30.6 per cent year-on-year in June.

Imports rebounded from their 2.3 per cent year-on-year drop in May to gain 1.3 per cent in June, widening the trade surplus to MYR4.32bn in June, up from MYR2.89bn the month before.

Taiwan: A decline in food prices and deceleration in the growth of housing costs meant that consumer inflation came in flat in July at 0.08 per cent year-on-year.

Australia: Retail sales remained flat in the second quarter, with no change in the seasonally adjusted numbers. Increased turnover in food services, household-goods retailing and food retailing were offset by falls in “other” retail and clothing and footwear. The Australian Performance of Services Index fell 2.1 points to 39.4 in July, the lowest level since March 2009.

Sales levels contracted for the fourth consecutive month, bringing the sales component to 34.9, its lowest level since April 2012. The new orders indicator also fell, dropping 7.5 points to 34.3, the lowest level in more than three years. One in five businesses surveyed said the most important factor affecting them was uncertainty about the forthcoming federal election.

India: Business activity contracted across the private sector for the first time in four years as the Composite Output Index fell to 48.4 in July from 50.9 in June. The Services index slipped to the no-change mark at 50 for the first time since October 2011. New orders fell amid reports of an increasingly fragile economy, while backlogs of work rose, accumulated as a result of power cuts and raw material shortages.

China: The composite PMI showed a second successive month of contraction as it slipped to 49.5 in July from 49.8 the month before. The services index remained steady at 51.3. Hongbin Qu, a chief economist at HSBC, said: “The profit margin continued to be squeezed given the divergence between input-prices and prices-charged indices. Without a sustained improvement of demand, services growth is likely to remain lacklustre, putting downside pressures to employment growth.”

Hong Kong: A continued decline in employment, output and new orders kept the PMI contracting in July, though the index did edge up a little to 49.7 from 48.7 the month before.

Japan: Stagnation in employment and new orders pulled the Business Activity Index down to 50.6 in July fro 52.1 the month before. The Composite Output Index also slipped to 50.7 from 52.3.


Eurozone: Seasonally adjusted retail sales were down 0.5 per cent month-on-month in June, bringing the year-on-year rate down to 0.9 per cent. Retail sales have fallen for 21 consecutive months, but this is the slowest rate of decline seen within that period.

The Markit PMI Composite Output Index rose to 50.5 and hit its highest point in nearly two years and showed business expanding for the first time since January 2012. Although the services index was just below the neutral line at 49.8, manufacturing production rose at its fastest rate since June 2011. The growth was led by Germany, though France and Italy both moved nearer the neutral mark of 50.

Rob Dobson, a senior economist at Markit, said: “The labour market remains the main bugbear of the eurozone, as rising joblessness hurts growth and raises political and social tensions. But even here there was some better news, with the rate of job-cutting easing to a 16-month low.”

The Sentix investor confidence indicator has risen to -4.9 after falling to -12.6 in July. A figure higher than zero indicates an increase in confidence.

Germany: The Services Business Activity Index rose to 51.3, up from 50.4 in June, while the Composite Output Index moved up to 52.1 from 50.4. Within services, the strongest growth was seen in the post and telecommunications, and financial intermediation sectors.

France: The Composite Output Index shifted nearer to the neutral level, hitting 49.1 in July after registering 47.4 in June. The Services Business Activity Index edged up to 48.6 in July, up from 47.2 the month before.

Jack Kennedy, senior economist at Markit, said: “The French service sector made a further move towards stabilisation in July, with activity and new business both showing slower falls.” However, he did point out that this “partly came at the cost of substantial price discounting, with average tariffs posting another sharp decline.”

Italy: The services PMI climbed up to 48.7 in July from 45.8 in June, signalling a slowing in the rate of business activity decline. However, the rate of job loss picked up for the fourth month running.

Spain: Although the service sector continues to contract, the rate of decline has slowed as the Business Activity Index pushed up to 48.5 in July from 47.8 the month before. This was the third successive month of improvement, but the economic crisis continued to affect business negatively, with activity decreasing across all sectors.

Turkey: Producer prices increased 6.61 per cent year-on-year in July, after a gain of 5.23 per cent in June, fuelled by high oil prices and the weak lira. Consumer price inflation accelerated to 8.9 per cent year-on-year in July, up from 8.3 per cent in June. It was pushed up by a 1.49 per cent month-on-month increase in transportation. The cost of housing, food, non-alcoholic beverages and tobacco all increased too, though clothing and footwear prices fell 4.68 per cent month-on-month.

Retail sales were much weaker in June than the month before, dropping 0.4 per cent year-on-year after a 2.2 per cent increase in May. A 2.4 per cent year-on-year rise in fuel sales and a 0.5 per cent increase in non-food sales were countered by a 1.9 per cent drop in food sales. Economists at 4Cast said: “Retail sales may have been depressed to well below trend by the impact of the June floods but to what degree this played a weakness in the total will only become clear after the July figures are out.”

Czech Republic: Retail sales fell 2.7 per cent in June from the year before, pulled down by a 3.6 per cent year-on-year drop in general trade, as well as decreases in the trade of food and beverages and automotive fuel sales. Economists at 4Cast attributed the weakness to the regional floods in June. They added that: “given that the automotive industry is the backbone of the Czech export economy, risk of soft external demand, with Germany also posting negative year-on-year vehicle sales, suggests the production side of the economy may still struggle”.

UK: In July, the service sector expanded at its quickest pace since before the financial crisis. The services PMI rose to 60.2 in July, up from 56.9 in June.

“The seventh month of sustained, accelerated growth in services was underpinned by improved market conditions both domestically and abroad,” said David Noble, chief executive at the Charter Institute of Purchasing and Supply. “The steep rise in new business and the sharpest rise in backlogs of work since 2010 have put some pressure on capacity, giving firms the conviction to take on more staff and increase wages, which have been stagnant for a long time.”

Russia: The Composite Output Index fell below 50 for the fist time in three years to 48.7. The services Business Activity Index fell to 48.7 from 48.8 in June, as activity fell across the board – except in transport and storage, and hotels and restaurants.

Lower commodity prices and weaker demand for commodities weighed on the export sector. Alexander Morozov, a chief economist at HSBC, said “Like a duet of synchronised springboard divers, output in services and manufacturing dove in unison at identical rates in July . . . Apparently, this kind of diving is not the one that can cheer anybody. In essence, it appears that the Russian economy has lost its growth engines”.

Middle East

Saudi Arabia: The Purchasing Managers’ Index stayed at 56.6 in July, as operating conditions for non-oil producing private companies continued to improve. Output and new order intakes increased in July though demand from export markets rose at the slowest pace since November 2010.

United Arab Emirates: The headline seasonally adjusted PMI edged up a little to 54.5 in July from 54.1 the month before. New business in the non-oil producing private sector, particularly from abroad, helped drive purchasing activity and stocks.

Simon Williams, a chief economist at HSBC, said the readings show “the UAE is maintaining momentum even as other, more high-profile emerging markets lose steam. Despite strong demand, inflationary pressures appear subdued and wages, though rising, are gaining only slowly.”

Egypt: The headline PMI fell to 41.7 in July from 47.5 the month before. New orders and output declined as new business from abroad waned amid fragile political conditions.

With additional reporting by FastFT

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