Manufacturing Weekly Economic Highlights | 4 November 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
“DXY meandered sideways this week”
“USD expected to gain as traders shift to safe haven assets”
“A Trump win is seen as supporting USD appreciation; a Harris win presages a USD devaluation”
“2025 global growth forecast at 3.1%, up from earlier forecasts”
“USD 3Q24 GDP falls to 2.8%”
“Manufacturing PMI slumps to 15-month low of 46.5”
“US adds only 12,000 new jobs; manufacturing employment falls 46,000”
The USD Index (DXY) finished sideways this past week, from 104.32 on 25 October 2024 to close at 104.32 on 1 November 2024. The DXY is up 0.00% for the week, up 1.75% for the month, up 2.94% YTD, and down 0.67% over the past 12 months.
Hedge funds, asset managers, and other currency speculators are positioned for ongoing appreciation of the USD, driven by a flight to safe haven assets ahead of the US presidential election, as reported on 1 November by Bloomberg.
Trading sentiment has shifted from a negative outlook in mid-October to a bullish outlook, with more than $8 billion USD of bullish trades this week.
Traders anticipate that Trump’s tariff policy would support the USD in the short term and weaken the CNY and Mexican Peso. However, Trump has also argued that the USD is too strong, causing traders to contemplate how Trump will balance these competing strategic objectives.
Conversely, traders expect a Harris administration to increase social spending which, along with reduced policymaking uncertainty, would cause the USD to trend lower.
Meanwhile, a poll of 500 economists has predicted strong global growth in 2025 of 3.1%, up from a predicted 2.6% in January and 2.9% in April, as reported on 1 November by Reuters.
The unexpected global economic resilience is primarily due to the performance of the US economy. India has also seen strong growth, along with “broad resilience in Asia.”
Inflation has also fallen sharply in 2024, with most central banks close to or already achieving their inflation targets.
In related news, the US economic GDP expanded at 2.8% YoY in 3Q24, down from 3.0% YoY in 2Q24, as reported on 30 October by Bloomberg.
US consumer spending surged 3.7% YoY in 3Q24, the largest gain since early 2023, with broad support across autos, household furnishings, and recreational items.
A favored economic measure Final Sales to Private Domestic Purchasers, which combines consumer spending and business investment, rose 3.2% YoY.
US Government spending was up 5% YoY, the largest increase in federal output since early 2021, with National Defense Expenditures surging 14.9% YoY for the biggest increase since 2003.
Purchases of computers and peripheral equipment surged 32.7% supported by AI investment.
However, as reported by The Wall Street Journal on 30 October, business investment only contributed a disappointing 0.46% YoY of 3Q24 growth, with R&D spending not increasing for the past two quarters. Companies generally first cut R&D spending amid uncertainty.
The US Inflation Reduction Act imposed drug-price controls leading to “enormous industry uncertainty and reductions to R&D.”
Companies are also wary of impacts from either a Trump or Harris administration.
Harris is seeking to raise the corporate tax rate from 21% to 28%, impose a new global minimum tax, and increase the IRA’s corporate book tax from 15% to 21%.
Trump is seeking to impose a 10% tariff across-the-board, which along with targeted tariffs on individual countries and products could drive significant adjustments to supply chains.
US Manufacturing activity slumped to a 15-month low in October amid higher prices for inputs, as reported on 1 November by Reuters.
The Institute for Supply Management (ISM) Purchasing Managers Index (PMI) fell to 46.5 in October from 47.2 in September to the lowest level since July 2023.
Manufacturing accounts for 10.3% of the US economy, and a PMI index below 50 indicates a contraction in the sector.
The Manufacturing PMI has remained in contraction for seven consecutive months, and the ongoing strike at Boeing has contributed to manufacturing sector weakness in September and October.
The New Orders PMI sub-index increased to 47.1 from 46.1 in September, but the Production Index fell to 46.2 from 49.8 as the Boeing strike impacts its suppliers.
The Prices Paid sub-index jumped to 54.8 from 48.3 in September to the highest level since December 2023. The Supplier Deliveries sub-index retreated to 52.0 from 52.2 indicating slower deliveries.
The Manufacturing Employment sub-index improved to 44.4 from 43.9 in September, though it still remains mired in contraction.
Fox Business reported on 1 November that US job growth fell far short of economist’s expectations, with US employers adding only 12,000 jobs in October.
The unemployment rate remained steady at 4.1%.
Additionally, the US Labor Department revised downwards both the August and September jobs estimates by a combined 112,000, continuing its recent trend of consistently overestimating new job growth.
In fiscal year 2023, employment growth was revised downwards by 443,000 jobs, exceeding 40% of total reported annual jobs growth. In 2022 the Labor Department overstated job growth by more than 1 million between March and June 2022.
The BLS report shows that Manufacturing employment fell by 46,000 jobs, and total private employment fell by 28,000.
Government added 40,000 new jobs, with private education and health services adding 57,000 jobs. Services added 49,000 jobs.
Europe
“EUR rebounded moderately this week relative to the USD”
“Eurozone inflation rises to 2.0% from 1.7% despite a small decline in energy prices”
“German GDP up 0.2% QoQ . . .
“. . . but inflation also rises to 2.4%”
“German unemployment rate 6.1% despite 27,000 new unemployed workers”
The EUR finished modestly higher this week, from $1.080 USD per EUR on 25 October 2024 to close at $1.088 USD per EUR on 1 November 2024. The EUR is up 0.79% for the week, down 0.87% for the month, down 1.41% YTD, and up 1.40% over the past 12 months.
Eurozone inflation rose more than expected to 2.0% YoY in October, up from 1.7% YoY in September, despite a small decline in energy costs. Food prices increased 2.9% YoY, as reported on 31 October by Bloomberg.
The resurgent inflation has increased sentiment for a more gradual easing of European Central Bank (ECB) policy rates.
Meanwhile, Germany’s GDP rose unexpectedly in 3Q24 by 0.2% QoQ, driven by government and household spending, as reported on 30 October by Reuters.
German economy minister Robert Habeck said, "This is still far from what we need, but at least it is a ray of hope. The economy is proving more robust than previously forecast and the technical recession expected by many has failed to materialize."
German 2Q24 GDP was revised to a fall of 0.3% QoQ from a decline of 0.1% QoQ previously reported.
The German economy is expected to continue to struggle amid high energy costs, weak global demand for its export products, and rising foreign competition.
German inflation rose 2.4% YoY up from 1.8% YoY in September. Core inflation was 2.9% in October up from 2.7% in September.
German unemployment increased by a more than expected 27,000 to a seasonally adjusted 2.86 million. The unemployment rate remained stable at 6.1%.
The German labor market could be shifting from a focus on wage increases to job security. German automaker Volkswagen is currently deep in negotiations over potential mass layoffs and wage cuts.
China
“The CNY finished modestly lower again this week”
“China’s manufacturing PMI shifts to expansion following five months of contraction . . .”
“. . . but manufacturing employment PMI falls to lowest level since May 2023”
“China relaxes foreign investment rules to attract more FDI”
“China to announce next phase of stimulus amid unemployment concerns”
The CNY ended modestly lower again this week, from 7.121 per USD on 25 October 2024 to close at 7.123 per USD on 1 November 2024. The CNY is down 0.02% for the week, down 1.04% for the month, down 0.13% YTD, and up 2.44% over the past 12 months.
China’s October economic indicators indicate some signs of recovery in the manufacturing and housing sectors, as reported on 31 October by Bloomberg.
The Caixin manufacturing PMI unexpectedly rose to 50.3 from 49.3 in September.
The official National Bureau of Statistics manufacturing PMI rose to 50.1for the first month of expansion following five consecutive months of contraction.
The manufacturing PMI expansion appears to be in anticipation of China’s fiscal stimulus expectations. However, the close race between Trump and Harris is leading to increased uncertainty over China’s economic growth outlook.
The Caixin manufacturing PMI employment sub-index fell to its lowest level since May 2023 amid widespread declines in employment at capital goods manufacturers including equipment and tools.
The new export orders subindex also shrank for the third consecutive month.
Bloomberg economics said, “This export-oriented survey also contains a message that’s consistent with leading indicators from major trading partners — external demand looks shaky ahead. Weakening external support would mean another challenge for policymakers as they try to rejuvenate the economy.”
Meanwhile, China is seeking to attract foreign investment by allowing foreign individuals to provide capital for publicly traded firms as strategic investors, as reported on 1 November by Bloomberg.
Previously, an overseas foreign investor seeking to acquire a non-controlling stake in an enterprise had to have at least $500 million USD. That stake has now been cut to $300 million.
Foreigners can also make strategic investments through tender offers other than private placements or transfers-by-agreement, and the 10% minimum stake requirements for investments made in private placements has been removed. The mandatory holding ratio for shares acquired through tender offers or transfers-by-agreement has ben reduced to 5% with the lock-up period for all types reduced from three years to twelve months.
Evercore ISI’s MD for China Research New Wang said, “Beijing is doing so now to mitigate the impact of a potential Trump victory on sentiment, but an announcement beforehand could avoid leaving the impression that Beijing is wary of Trump or worried about the possible outcomes of the US elections. Given the recent poor FDI inflows to China, these measures have been long overdue, regardless of who will get elected.”
China’s President Xi discussed unemployment pressures in a recently published speech, as reported on 31 October by Bloomberg.
“China is entering a period where strategic opportunities as well as risks and challenges coexist, and unexpected factors are rising. The pressure on stabilizing growth and employment will persist.”
Xi made the remarks in May 2024 at a Politburo study session, but China only published the remarks on 29 October.
China is expected to announce the next stage of its economic stimulus plan during the coming week.
Thailand
“The THB finished moderately lower again this week
“THB depreciation supported by FDI outflows and profit taking on gold”
“BoT and Finance Ministry agree to retain inflation target of 1% to 3%”
“Inflation expected to hit 1% in 4Q24 following 0.6% in September”
“Thai FY2024 tax revenues fall short of budget, no impact on cash flow or disbursements expected”
The THB ended moderately lower again this week, from 33.64 per USD on 25 October 2024 to close at 33.83 per USD on 1 November 2024. The THB is down 0.45% for the week, down 1.62% over the past month, up 1.60% YTD, and up 4.57% over the past 12 months.
The Kasikorn Research Center reported that the recent depreciation of the THB has been supported by foreign investment outflows totaling THB 2.44 billion in equities and THB 2.89 billion in bonds, along with profit taking following the surge of gold prices to record highs.
The THB is expected to trade between 33.50 and 34.30 per USD in the coming week.
Meanwhile, Bloomberg reported on 30 October that the Bank of Thailand (BoT) has secured an agreement with the Finance Ministry to retain its official inflation target at 1% to 3% for the coming year. This target has been in place since 2020, and “remains appropriate.”
Retaining the existing inflation target is seen as a victory for the BoT, but the Government continues to pressure the BoT to further lower its policy rate following its first rate cut in four years in October to 2.25%.
The Finance Ministry was advocating for a higher inflation goal to lower borrowing costs and accelerate economic growth. However, BoT Governor Dr. Sethaput insisted that the current inflation target has served the economy well, and the bar for further easing of the policy rate “has to be reasonably high.”
Thailand’s inflation has undershot the BoT target this year, averaging 0.2% YoY during the first nine months of 2024 and most recently at 0.6% YoY in September. The BoT expects inflation to return to the lower end of the target in 4Q24.
The BoT Monetary Policy Committee said that Thailand’s low inflation doesn’t indicate signs of potential deflation as there has been no broad-based and continuous decline in prices.
Thailand announced a tax revenue shortfall in FY 2024 of THB 4 to 5 billion ($117 million to $147 million USD) primarily due to excise tax reductions and a strong THB, as reported by the Thai News Agency on 30 October.
However, budget management remains unaffected and cash flow for disbursements continues as usual.
Finance Ministry Permanent Secretary Lawaron Saengsanit said that the revenue shortfall will not affect the fiscal balance as the annual budget disbursement often fails to reach 100% ensuring adequate cash flow for ongoing operations.
Commodities
“GSCI Commodity Index ended moderately lower this week”
“The GSCI Industrial Metals Index ended modestly lower this week”
“China announces major new finds of green-energy mineral resources”
“China’s steel industry 2024 losses surge to $5 billion USD amid ongoing property crisis”
The GSCI Commodity Index finished moderately lower this week, from 546.32 on 25 October 2024 to close at 534.80 on 1 November 2024. This index is a weighted index based on world-production of each commodity in the index, with energy and industrial metals comprising the bulk of the index weighting. The GSCI is up 1.33% YTD. Trading Economics has maintained its GSCI forecast this week at 536 by the end of 4Q24 and 515 in 12 months.
The GSCI Industrial Metals index finished modestly lower this week, from 468.24 on 25 October 2024 to close at 461.51 on 1 November 2024. The Industrial LME Metals Index is up 12.88% over the past 12 months.
China’s Ministry of Natural Resources reported “prominent results” in its ongoing search for green-energy mineral resources, as reported on 2 November by the South China Morning Post.
China announced finding new deposits including 57 tons of gold, 3.8 million tons of copper, 137,000 tons molybdenum, 446 million tons of phosphorite, and 6.9 million tons of fluorite. These minerals are used for energy, semiconductors, quantum, and other key green and high-tech industries.
The Ministry said, “In the first three-quarters of this year, we made new significant discoveries of a batch of large-scale mines with verified deposits. It has significant meaning for our supply chain security, energy security and national security.”
China launched its “mineral hunting” initiative in 2021 seeking breakthroughs within 15 years in the search for “crucial minerals that will determine the future of manufacturing, emerging technologies, and the defense industry, as well as the geopolitical landscape.”
The International Energy Agency (IEA) reports that China has 28% of the world’s reserves of natural graphite which is used as anode material in lithium-ion batteries, and 38% of the world’s rare earth reserves.
Meanwhile, China’s steel industry cumulative losses surged to CNY 34 billion ($5 billion USD) over the first nine months of 2024, as reported on 27 October by Bloomberg.
Chinese steel mills have been forced to slash production amid China’s ongoing property crisis. Some mills could face bankruptcy.
China’s main steel industry association said it would propose policies to encourage consolidation among members and urged steel firms to avoid “cutthroat competition.”
Energy
"Crude retreated moderately lower this week”
“Henry Hub ended moderately higher again this week”
“EU Natural Gas ended moderately lower again this week”
“Crude risk premium remains volatile amid Iran – Israeli conflict and the uncertain outcome of the US presidential election”
“Non-OPEC oil supplies surge amid weak demand as OPEC contemplates relaxing production cuts”
“Europe negotiates gas deal with Azerbaijan to offset expiring Russia’s Ukraine gas transit agreement”
Brent Crude finished moderately lower this week, from $75.90 USD on 25 October 2024 to close at $72.94 USD on 1 November 2024.
Henry Hub finished moderately higher again this week, from $2.53 USD per MMBTU on 25 October 2024 to close at $2.65 USD per MMBTU on 1 November 2024.
EU Natural Gas finished moderately lower this week, from €43.61 per MWh on 25 October 2024 to close at €38.94 per MWh on 1 November 2024, equivalent to $10.50 USD per MMBTU. EU Natural Gas is up 20.36% YTD. Trading Economics decreased its EU Natural Gas TTF forecast this week to €40.98 per MWH by the end of 4Q24 and 44.52 in 12 months.
October oil prices were driven by geopolitical volatility, with Brent closing higher for the month despite falling on at month end, as reported on 31 October by MarketWatch.
The risk-premium fell following Israel’s retaliatory strike on Iran when it did not target Iran’s oil infrastructure. However, Iran’s announced intention to respond to Israel’s retaliatory strike and US sanctions on the Iranian crude-oil export market and its “ghost fleet” of crude tankers could see prices rise in November.
US 3Q24 GDP growth was lower than expected at 2.8% YoY, implying weaker underlying demand, and China’s oil demand will be determined by Chinese refinery demand and the general health of the Chinese and Global economies.
The outcome of the US presidential election will also have a significant impact on crude oi prices depending on foreign policy towards Russia, China, and Iran along with domestic policy on drilling and energy development investment incentives.
Meanwhile, Bloomberg reported on 1 November that growing US petroleum production, currently exceeding Saudi Arabia by 50%, including major increases by Exxon Mobile and Chevron, comes amid OPEC+ plans to increase their supply of crude to the global market.
Crude prices have fallen roughly 12% in the past six months as China’s demand remains lackluster.
Meanwhile, Guyana, Brazil, and other non-OPEC+ producers have contributed new oil supply that could add up to 5 million bpd in 2025.
Bloomberg also reported that OPEC’s oil production rose in October by 370,000 bpd as Libya restored its output by 500,000 bpd following a resolution of its political crisis. Iraq, Iran, and Saudi Arabia trimmed production.
OPEC had previously announced plans to start reversing supply cuts implemented over the past two years, but deteriorating market conditions have thus far thwarted their plans.
OPEC+ Ministers are scheduled to meet on 1 December to review their 2025 production policies.
Bloomberg reported on 31 October that European natural gas buyers from Hungary and Slovakia are close to signing a commercial agreement with Azerbaijan for as much as 12 to 14 billion cubic meters of gas per year to offset gas transiting from Russia through Ukraine under an agreement that expires at the end of this year.
The agreement would effectively offset the gas currently supplied via Ukraine and would need to involve a swap agreement between Azerbaijan and Russia because Azerbaijan doesn’t have enough export capacity to replace the existing supplies.
European gas futures for December plunged 8.1% on news of the deal under negotiation.
The deal, if successfully finalize, would see Ukraine continuing to earn transit fees for the use of its pipeline network.
Logistics
“The BDI ended moderately lower again this week”
“The CFI ended moderately higher again this week”
“Will the third time be the charm in Boeing’s quest to end its strike?”
Baltic Dry Index finished moderately lower again this week, from 1,410 on 25 October 2024 to close at 1,378 on 1 November 2024. The BDI is down 34.19% YTD. Trading Economics has lowered its BDI forecast this week to 1,324 by the end of 4Q24 and 1,149 in 12 months.
The Containerized Freight Index finished moderately higher again this week, from 2,185.3 on 25 October 2024 to close at 2,303.4 on 1 November 2024. This index tracks the current freight prices for containerized transport from the most important Chinese ports. The CFI is up 30.91% YTD. Trading Economics has increased its CFI forecast this week to 2,408 by the end of 4Q24 and 2,751 in 12 months.
Boeing has reached a new deal with its Machinists Union in its third attempt to end the strike that began on 13 September, as reported on 31 October by The Wall Street Journal.
Boeing is offering a 38% wage increase over four years, increased from the 25% and 35% increase offers that were previously rejected by union members.
The new deal also increases the ratification bonus from $7,000 to $12,000.
The union is scheduled to vote on 4 November.
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