Manufacturing Weekly Economic Highlights | 29 April 2024
Welcome to our weekly manufacturing and economic newsletter, providing key insights and analysis on the latest developments in the global market. Stay updated and make informed decisions!
In this edition, we focus on the economic conditions in America, Europe, China, Thailand, as well as updates on the energy and logistics markets.
Americas
“USD closed modestly lower this week”
“US GDP falls to 1.6% YoY for 1Q24, down from 3.4% in 4Q24 and 4.9% in 3Q24”
“US PCI rises to 3.4%, highest inflation in a year, with core PCI up to 3.7% YoY”
“Is US govt spending keeping the economy afloat at the cost of rising inflation and massive debt?”
The USD Index (DXY) finished modestly lower this past week, from 106.12 on 19 April 2024 to close at 106.09 on 26 April 2024. The DXY is down 0.06% for the week, up 1.48% for the month, up 4.70% YTD, and up 4.36% over the past 12 months.
The US GDP increased 1.6% YoY during 1Q24, significantly below the estimate of 2.4% YoY, as reported on 25 April by CNBC. US GDP increased 3.4% during 4Q24 and 4.9% in 3Q24
The US Personal Consumption Index (PCI), the inflation measure preferred by the US Fed, increased 3.4% YoY in 1Q24. This was the biggest increase in the PCI in the past year, and significantly higher than the 1.8% YoY increase in 4Q24. Core PCE increased at 3.7% YoY, also significantly higher than the Fed’s target of 2%.
US consumer spending increased by 2.5% YoY in 1Q24, down from 3.3% in 4Q24 and lower than the Wall Street estimate of 3.0% YoY. Fixed investment and government spending significantly contributed to GDP growth during the quarter. Net exports reduced GDP by 0.86 percentage points whereas consumer spending contributed 1.68 percentage points.
LPL Financial Chief Economist Roach said, “The economy will likely decelerate further in the following quarters as consumers are likely near the end of their spending splurge. Savings rates are falling as sticky inflation puts greater pressure on the consumer. We should expect inflation will ease throughout this year as aggregate demand slows, although the path to the Fed’s 2% target still looks a long way off.”
Europe
“EUR ended modestly higher this week relative to the USD”
“Eurozone PMI rises to 51.4 in April with Germany showing expansion for the first time in a year”
“Eurozone 1Q24 GDP estimated at 0.5%”
“But Eurozone manufacturing remains stuck in deep contraction”
The EUR finished modestly higher this week, from $1.066 USD per EUR on 19 April 2024 to close at $1.069 USD per EUR on 26 April 2024. The EUR is up 0.33% for the week, down 0.97% for the month, down 3.13% YTD, and down 2.97% over the past 12 months.
The HCOB Eurozone Composite PMI Output Index rose from 50.3 in March to 51.4 in April, further moving the PMI deeper into the expansion range. This was the strongest PMI report in 11 months and appears to indicate that the growth gap between the Eurozone and the US may be closing “more rapidly than expected”, as reported on 23 April by MarketWatch. The PMI report also indicated that Germany has returned to growth for the first time in nearly 1 year. European Central Bank VP Luis De Guindos said, "If we compare the euro area with the U.S, it's clear that our growth is lower. The leading indicators in Europe point to a modest recovery in the second half of 2024. But we will have a growth rate of less than 1%, below our potential, which is a very low outcome."
The ECB has signaled that it will cut its policy rate in June amid falling inflation and weak economic conditions, whereas the US Fed is expected to further delay any policy rate cut to later in the year.
The Eurozone PMI showed that the Eurozone manufacturing sector continues to be stuck in a deep contraction, whereas US factory activity continues to expand. However, the Eurozone services activity is rapidly expanding.
JP Morgan estimated Eurozone economic activity grew 0.5% YoY in 1Q24, buoyed by a recovery in real incomes and foreign demand.
China
“The CNY ended modestly lower again this week”
“China inbound FDI down for third consecutive month in March”
“US companies reluctant to invest in China due to policy unpredictability”
“Action moves markets, not policy promises”
The CNY ended modestly lower again this week, from 7.240 per USD on 19 April 2024 to close at 7.246 per USD on 26 April 2024. The CNY is down 0.09% for the week, down 0.34% for the month, down 1.87% YTD, and down 4.83% over the past 12 months.
Bloomberg reported on 23 April that US companies are wary to invest in China due to concerns about policy unpredictability, based on a survey conducted the American Chamber of Commerce in China.
Beijing announced several measures to boost overseas investment including a 24-point action plan. However, foreign CEOs complain that China hasn’t followed through on the promises. AMCHAM China Chair and former US Counsel General and Shanghai Sean Stein said, “so far, we’ve seen limited implementation of the 24 points. We’re at a stage now, where promises of polices don’t move markets and they don’t lead to investments. Action leads to investment.”
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Foreign investment into China fell on a YoY basis for the third consecutive month in March, amid concerns of geopolitical tensions and China’s uncertain growth outlook.
Thailand
“THB ended moderately lower again this week to its lowest level since October”
“Thailand to elect a new post-coup Senate in June”
The THB ended moderately lower again this week, from 36.79 per USD on 19 April 2024 to close at 37.01 per USD on 26 April 2024. The THB is down 0.49% for the week, down 1.87% over the past month, down 7.65% YTD, and down 8.41% over the past 12 months.
Thailand plans to elect new senators in June, to replace outgoing senators appointed by the 2014 coup government, as reported on 23 April by Bloomberg. The new Senate will have 200 lawmakers, compared to 250 previously, and will be elected to a 5-year term. The new Senate won’t have the power to elect a prime minister but will mostly retain its other powers. The senate election results are expected to be announced on 2 July, in time to join the bicameral parliament when it reconvenes on 9 July.
Energy
“Crude closed moderately higher this week”
“Henry Hub and EU Natural Gas both closed moderately lower this week”
“Oil rises despite reduced ME tension as Ukraine ramps up attacks on Russian oil infrastructure”
“US and Europe preparing new Iran sanctions”
“ … but OPEC has excess production capacity to offset supply disruptions”
Brent Crude finished moderately higher this week, from $87.39 USD on 19 April 2024 to close at $89.33 USD on 26 April 2024.
Henry Hub finished moderately lower again this week, from $1.76 USD per MMBTU on 19 April 2024 to close at $1.62 USD per MMBTU on 26 April 2024.
EU Natural Gas finished moderately lower this week, from €30.75 per MWh on 19 April 2024 to close at €29.38 per MWh on 26 April 2024, equivalent to $8.18 USD per MMBTU. EU Natural Gas is down 4.95% YTD.
Oil prices rose late in the week despite reduced Middle East tensions, driven by an unexpected fall in US crude inventories and concerns about attacks on Russian oil infrastructure.
The US and Europe are preparing new sanctions against Iran, but the sanctions may not have a material impact on the supply of oil in the near term. As reported by Oilprice.com on 24 April, the market expects spare OPEC production capacity to offset any supply shocks, with ongoing tensions unlikely to result in significant supply disruptions.
Meanwhile, Ukraine has struck at least 20 Russian energy facilities in 2024 despite pleas from the US to stop attacking Russian energy infrastructure. As reported by Oilprice.com on 26 April, the Biden administration is concerned that higher war risk premiums will further stoke inflation ahead of the November US presidential elections.
Ukraine has limited its attacks to oil-processing facilities and has not attacked crude oil and oil product export terminals. However, Ukraine’s goal is to reduce Moscow’s oil revenues to disrupt is war funding, meaning Russian oil export terminals could be the target of future drone attacks.
Logistics
“BDI closed moderately lower this week”
“The CFI closed moderately higher this week”
“Panama Canal ramping up transits as dry season ends”
Baltic Dry Index finished moderately lower this week, from 1,919 on 19 April 2024 to close at 1,721 on 26 April 2024. The BDI is down 17.81% YTD. Trading Economics has retained its BDI forecast this week at 1,818 by the end of 1Q24 and 2,111 in 12 months.
The Containerized Freight Index finished moderately higher this week, from 1,757 on 19 April 2024 to close at 1,941 on 26 April 2024. This index tracks the current freight prices for containerized transport from the most important Chinese ports. The CFI is up 10.29% YTD. Trading Economics has retained its CFI forecast this week at 1,824 by the end of 1Q24 and 2,042 in 12 months.
The Panama Canal is slowly ramping up vessel transits as the dry season comes to an end. Daily transits have recently increased from 24 to 27, though scheduled maintenance from 7 to 15 May will limit daily transits to 24 vessels, as reported on 21 April by Sourcing Journal. Transits should rise to 31 per day on 16 May and are forecast to reach 32 per day on 1 June. Vessel draft restrictions have also been eased slightly.
Water levels in Gatun Lake in April were 2.6 feet lower than the five-year average, significantly improved from the 5.5 feet differential in January.
Vessels queued to transit the Panama Canal have fallen from 161 in August 2023 to 45 vessels recently.
Strategic & Management consulting - Business Incubator in China
8mo(1) It is worrisome that inflation immediately peaks every time the US economy looks like it is improving and growing. Prices seem contained, waiting for an opportunity to grow. (2) I am surprised about Panama channel traffic. Despite the water situation, a reduction in vessels from 161 to 45 is a notorious number. This means the Pacific is not trafficking to the US East Coast. Is this because of the reduction in cargo load or because LA port finally caught up?