German Inflation Unchanged, PMIs Show Mixed Growth Picture with China Rebounding
Economic news and commentary for March 1, 2023
Germany CPI
Germany’s CPI grew 0.8% MoM and 8.7% YoY in February, the same as January. Energy and food prices, in particular, have increased considerably since the war started in Ukraine and have had a substantial impact on the inflation rate. In February 2023, food prices showed above-average growth (+21.8%) compared with the same month of the previous year. Energy prices, in contrast, eased slightly. To limit the increase of energy product prices, measures of the Federal Government’s third relief package have been adopted which are reflected in the consumer price index. Despite the relief measures, energy prices were 19.1% higher in February 2023 than in February 2022.
S&P Global Manufacturing PMIs
Asia Pacific
India: 55.3 (Jan 55.4)
Russia: 53.6 (Jan 52.6)
China: 51.6 (Jan 49.2)
Australia: 50.5 (Jan 50.0)
Japan: 47.7 (Jan 48.9)
Europe
Italy: 52.0 (Jan 50.4)
Spain: 50.7 (Jan 48.4)
UK: 49.3 (Jan 47.0)
Netherlands: 48.7 (Jan 49.6)
Poland: 48.5 (Jan 47.5)
France: 47.4 (Jan 50.5)
Germany: 46.3 (Jan 47.3)
Czech Republic: 44.3 (Jan 44.6)
Still to come…
9:45 am (EST) - US S&P Global Manufacturing PMI
10:00 am - US ISM Manufacturing PMI
10:00 am - US Construction Spending
10:30 am - US EIA Petroleum Status Report
11:00 am - World S&P Global Manufacturing PMI
11:00 am - US Survey of Business Uncertainty
Morning Reading List
Other Data Releases Today
German employment grew 0.2% MoM in January. 1.32 million people were unemployed in January 2023. That was a decrease of -107,000, or- 7.5%, compared with January 2022. The unemployment rate was unchanged at 3.0% and down from a year ago (January 2022: 3.3%).
China’s CFLP Manufacturing PMI grew to 52.6 in February, up from 50.1 in January. The Production index jumped 6.9 pts to 56.7, and the New Orders index increased 3.2 pts to 54.1. The Non-Manufacturing PMI stayed strong at 56.3, up 1.9 pts from the previous month. The index tracking business activity expectations was strong at 64.9.
Australia GDP
Australia: Growth and inflation both slow (ING) - A double whammy of slowing growth and moderating inflation, but it won't be enough to get the central bank to pause next week.
China PMIs
China update - Economic recovery picks up steam (Saxo Bank) - The official NBS Manufacturing PMI and Non-manufacturing PMI, and the Caixin Manufacturing PMI data released today confirm that the ongoing economic upturn in the Chinese economy is picking up momentum. Chinese consumer and technology stocks are likely to resume the uptrend after spending January consolidating. China’s little giant companies in the A-share market may present opportunities to long-term investors who are looking for participating in growth stocks in niche technology markets.
China’s solid PMIs hint at a high GDP target at the Two Sessions (ING) - Both manufacturing and non-manufacturing PMIs for February were very strong. Some sub-indices are the highest in several years. This supports our view that the Two Sessions government meeting will set a high GDP growth target.
Factory activity revives in mainland China as economy reopens (S&P Global) - While there were some uncertainties as to whether looser COVID-19 restrictions will boost the economy or lead to more disruption amid rising illness rates, the early evidence from the PMI surveys is encouraging. The Caixin China General Manufacturing PMI, compiled by S&P Global, rose to 51.6 in February, up from 49.2 in January to register the first overall improvement in factory business conditions since prior to the Omicron wave, last July.
China: Strong February PMIs confirm reopening rebound (ABN AMRO) - China Macro: February PMIs confirm rebound is strengthening. 2023 growth target to be announced at National People's Congress.
Canada GDP
Cdn GDP: Frosty End to 2022, Hot Start to 2023 (BMO) - The Canadian economy ended 2022 with a bit less spunk than expected, although the early read on January was solid. Real GDP was flat (0.0% annualized) in Q4, well below the preliminary estimate of 1.5%, and by far the coolest quarter of 2022. December alone was down 0.1% (flash was flat).
Canada's GDP flatlines to close out 2022 (TD Bank) - Canada's economy ended 2022 with a thud. Expectations going into this report were for another solid gain. Though we knew housing and non-residential investment were going to pull down GDP, the impact from inventories was huge. What came in as expected was the rebound in consumer spending, which posted a solid 2% q/q gain, with spending on high end goods leading the way. This helped final domestic demand come in right around expectations at +1% q/q.
US
Globalization in Retreat: Implications for the U.S. Economy, Part III: The Labor Market (Wells Fargo) - Perhaps no sector in the U.S. economy has been as profoundly affected by globalization as manufacturing. The number of American factory jobs has declined roughly 35% on balance since its peak in 1979. Although economic downturns have a negative effect on factory employment, significant import competition and relocation of production facilities to foreign countries have weighed on manufacturing employment in the United States.
Home Price Gains Weakened in December (NAHB) - Seasonally adjusted home prices continued to fall in December and have declined for six consecutive months due to high mortgage rates and economic uncertainty. Locally, all 20 metro areas, reported by S&P Dow Jones Indices, experienced negative home price appreciation in December.
Americans Are Less Confident but Inflation Expectations Are Down (BMO) - Buying plans may be a little uncertain but that cannot be gleaned from the latest trade report. The advance estimate for the goods trade deficit widened to a 3-month high of $91.5 bln. Exports actually rose for the first time in five months, jumping 4.2% in January, the biggest increase since March, with higher shipments out of all major categories such as industrial supplies and auto-related parts.
Consumers Increasingly Worried About What Lies Ahead (Wells Fargo) - Consumers' confidence continued to wane in February. A tight labor market is keeping consumers feeling secure about their present situation, but still high prices and rising borrowing costs leave consumers particularly concerned about what lies ahead.
Europe
Swedish Q4 GDP: A sour end to 2022, but coming from a stronger place (Nordea) -Swedish GDP was revised up for both 2021 and 2022, while GDP growth for Q4 2022 was revised down to -0.9% q/q.
United Kingdom Economy Still Likely to Underwhelm in 2023 (Wells Fargo) - While there have been some mildly encouraging developments in the recent U.K. data flow, the outlook for the British economy remains distinctly subpar. A flat Q4 GDP outcome has been followed by improving confidence surveys early this year. However, with prior price increases likely to pose lingering challenges to household purchasing power, we still forecast U.K. GDP to contract 0.6% in 2023.
Inflation
Remarks for the Panel Discussion “Why Did We Miscast Inflation?” (Susan Collins, Boston Fed) - Inflation remains too high. I anticipate further rate increases to reach a sufficiently restrictive level, then holding there for some, perhaps extended, time. My views will continue to be based on a holistic assessment of available information. And while aware of the risks and uncertainties, I remain optimistic there is a path to restoring price stability without a significant downturn.
Real Estate
Does the CRA Increase Household Access to Credit? (Liberty Street Econojmics, NY Fed) - Congress passed the Community Reinvestment Act (CRA) in 1977 to encourage banks to meet the needs of borrowers in the areas in which they operate. In particular, the Act is focused on credit access to low- and moderate-income communities that had historically been subject to discriminatory practices like redlining.
Threat of global housing slide looms amid rising rates (Dallas Fed) - Housing froth has reemerged since 2020, with signs of a pandemic housing boom extending beyond the U.S. to other, mostly advanced, economies. While house-price growth has recently begun to moderate—or, in some countries, to decline—the risk of a deep global housing slide persists.
Research
A Ramsey Theory of Financial Distortions (Minneapolis Fed) - The return on government debt is lower than that of asset with similar payoffs. We study optimal debt management and taxation when the government cannot directly redistribute towards the agents in need of liquidity but otherwise has access to a complete set of linear tax instruments. Optimal government debt provision calls for gradually closing the wedge between the returns as much as possible, but tax policy may work as a countervailing force: as long as financial frictions bind, it can be optimal to tax capital even if this magnifies the discrepancy in returns.
Did expanded Child Tax Credit enable parents in financially vulnerable households to work during pandemic? (Dallas Fed) - The Child Tax Credit (CTC), a tax provision designed to improve the financial resiliency of American families, was temporarily expanded under the 2021 American Rescue Plan Act (ARPA) in response to the COVID-19 crisis. CTC funds reached approximately 35 million families that year and are estimated to have reduced the child poverty rate by about 25 percent.
Subscribe to receive Econ Mornings every weekday at 9 am. More economic and finance content on Twitter, Reddit, and my website.