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European equity markets closed lower across the region for the
second consecutive day and most APAC markets also ended lower
except for China. US equities were lower for most of the trading
session, but most closed higher, except for the Russell 2000, after
a late-afternoon rally. Both iTraxx and CDX indices closed almost
flat on the day across IG/high yield, with CDX tightening from its
lowest point of the day alongside the rally in US equities. Gold
broke new records again today and both Brent/WTI closed higher.
Americas
Most US equity markets closed higher, except for the Russell
2000 -1.0%, after suddenly rallying from near the lows of the day
beginning at 2:10pm EST; Nasdaq +1.5%, S&P 500 +0.8%, and DJIA
+0.4%.
10yr US govt bonds closed -2bps/0.54% yield and 30yr bonds
-1bp/1.20% yield.
CDX-NAIG closed -1bp/69bps and CDX-NAHY flat/433bps, which is
-1bp and -29bps, respectively, week-over-week.
Gold closed +2.2%/$1,986 per ounce to another record high close
and earlier in the day reached a new all-time intraday high of
$1,996.80 per ounce before the New York market open.
Crude oil closed +0.9%/$40.27 per barrel.
Coronavirus cases in the U.S. increased 0.5% at 11:04 a.m.
compared with the same time Thursday to 4.5 million, according to
data collected by Johns Hopkins University and Bloomberg News. The
increase was below the average 1.6% daily gain over the past week.
Deaths rose 0.3% to 152,074. (Bloomberg)
The University of Michigan US Consumer Sentiment Index fell 5.6
points (7.2%) to 72.5 in July, giving up essentially all of its
gains in June. The reading is consistent with our expectation for
slower growth in consumer spending over the next several months.
(IHS Markit Economist David Deull and James Bohnaker)
The final reading represented a 0.7-point decrease from the
preliminary reading, suggesting that optimism dampened over the
course of the month.
The current conditions index fell 4.3 points in July, to 82.8,
while the expectations index fell 6.4 points to 65.9.
Regional changes in consumer sentiment in the latter half of
July continued to defy the pattern traced by the worst effects of
the pandemic. Sentiment in the Northeast region plunged 16.6 points
despite a relatively low and stable rate of new COVID-19
infections. In contrast, consumer sentiment in the South increased
1.0 point and left the region's level at 78.3. The spread between
the region with the highest level of consumer sentiment (the South)
and the lowest (the West) was 14.4 points.
Consumer sentiment fell 5.7 points to 75.9 among households
earning more than $75,000 a year and fell 6.2 points to 67.2 among
lower-earners.
Buying conditions were mixed in July. The index of buying
conditions for large household durable goods retreated 9 points to
106, while that for vehicles dove 16 points to 124. The index of
buying conditions for homes rose 3 points to 133, just shy of its
2019 average.
The index of consumers' views on their current financial
situation relative to a year earlier plunged from 141 in February
to 106 in April. It has remained essentially unchanged since, and
was 108 in July. Though the lack of improvement in this measure is
notable, so is its still elevated level, which reflects a greater
proportion of respondents reporting improvement (39%) than decline
(31%). The lowest point for this index after the Great Recession,
in September 2009, was 58. Fiscal stimulus has cushioned much of
the economic blow to households from the current recession so
far.
US personal income decreased 1.1% in June and real disposable
personal income (DPI) declined 1.8%. The decrease in personal
income primarily reflected dwindling "economic impact payments" as
more than 98% of the rebates issued through June were disbursed in
April and May. (IHS Markit Economists James Bohnaker and David
Deull)
Partially offsetting the decrease in other government social
benefits was a $110.7-billion (annual rate) increase in
unemployment insurance thanks to pandemic-related programs that
were supporting more than 30 million people at the end of
June.
Employee compensation and proprietors' income also increased as
more businesses reopened. More than two-thirds of the increase in
proprietors' income was accounted for by additional loans to
businesses as part of the Paycheck Protection Program (PPP).
Real personal consumption expenditures (PCE) increased 5.2% in
June to a level that was 6.6% below the pre-pandemic peak in
February. This was stronger than expected and resulted in a
2.9-percentage-point upward revision to our forecast for
third-quarter growth of real PCE.
With outlays partially catching up with personal income in
June, the personal saving rate eased from 24.2% to 19.0%.
This release incorporated annual revisions for the previous
five years. In 2019, personal income was 0.3% lower than previously
reported and outlays were revised down less than 0.1%—not
enough to impact our outlook.
Despite the strong initial rebound in consumer spending through
June, fading fiscal support and elevated COVID-19 infection rates
in some parts of the country point to a stalling recovery in real
PCE over the next few months.
Microsoft Corp. is exploring an acquisition of TikTok's
operations in the U.S., according to a people familiar with the
matter. A deal would give the software company a popular
social-media service and relieve U.S. government pressure on the
Chinese owner of the video-sharing app. (Bloomberg)
Ford has reported better-than-expected financial results in the
second quarter, recording net income of USD1.1 billion, assisted by
a USD3.5-billion gain from Argo AI. However, Ford recorded an
adjusted EBIT loss of USD1.95 billion in the second quarter. <span/>(IHS Markit
AutoIntelligence's Stephanie Brinley)
In the second quarter, Ford's revenues fell 50.1% year on year
(y/y) to USD19.4 billion on business disruption from halted
production and sales in Europe and the Americas roughly from March
through May because of the COVID-19 pandemic.
In the year to date (YTD; January to June), Ford's revenues
dropped 32.2% y/y to USD53.7 billion.
Ford reported net income of USD1.1 billion in the second
quarter, as a result of a USD3.5-billion gain as Argo AI was
deconsolidated after Volkswagen (VW)'s investment in June .
Although Argo AI has been deconsolidated, Ford chief financial
officer (CFO) Tim Stone stated that this will not change the
automaker's planned investment in autonomous vehicles. The timing
of the USD3.5-billion gain was a significant factor in the
company's second quarter being stronger than expected.
In the second quarter, Ford's adjusted EBIT loss was USD1.95
billion, compared with adjusted EBIT of USD1.65 million a year
earlier.
In an effort to ensure the company has sufficient liquidity to
weather the difficult market conditions in the coming months and to
support key launches, Ford drew on credit lines and its debt
increased to USD40.0 billion at the end of the second quarter, from
USD15.3 billion at 30 June 2019.
Lower volumes and poorer mix impacted on Ford's adjusted EBIT
by USD5.7 billion in the second quarter, easily the most notable
impact, although net pricing did have a USD1.3-billion positive
impact on adjusted EBIT.
Dana has reported a sales decrease of 53% year on year (y/y) to
USD1.08 billion in the COVID-19-pandemic-hit second quarter of
2020. (IHS Markit AutoIntelligence's Stephanie Brinley)
Dana's second-quarter sales were down from USD2.3 billion in
second quarter 2019, a decline attributable to weaker demand across
all mobility markets as customers idled operations over much of the
quarter because of COVID-19 virus containment measures.
The conditions caused Dana to report an increased quarterly net
loss of USD174 million, compared with a net loss of USD68 million
in second quarter 2019.
Along with pandemic impacts, Dana reported higher income tax
expenses in the second quarter of 2020 and settlement charges.
Dana reports that, excluding charges, the second-quarter net
loss was USD118 million, compared with net income of USD103 million
in the second quarter of 2019.
Dana reported an adjusted EBITDA loss of USD5 million in the
second quarter, versus USD286-million profit a year earlier, which
Dana stated was the result of halted production, offset by targeted
management cost actions and a production restart in May.
Dana chief financial officer Jonathan Collins said, "Our timely
cost saving actions and operational flexibility have served us well
as we managed through this difficult quarter. We remain confident
in our ability to capitalize on improving market conditions over
the balance of the year."
Visteon has reported its financial results for the second
quarter, including a 49.4% year-on-year (y/y) decline in net sales
to USD371 million and a net loss of USD45 million. (IHS Markit
AutoIntelligence's Stephanie Brinley)
The auto industry supplier said the sales decrease in the
second quarter was on production declines related to plant
shutdowns because of the COVID-19 pandemic, driving the net loss
and a reduced gross margin.
In the second quarter, Visteon's sales were down from USD733
million in the corresponding quarter of 2019.
Visteon states that its gross margin fell to USD4 million in
the second quarter, compared with USD70 million a year
earlier.
The company's net loss attributable to Visteon of USD45 million
in the second quarter compares with net income of USD7 million in
the corresponding quarter of 2019.
The second-quarter loss included a USD4-million charge on a
recently introduced restructuring program.
In the year to date, Visteon has reported USD1.7 billion in
lifetime sales, mostly from digital instrument clusters,
infotainment, and displays. The company's adjusted net loss was
USD42 million in the second quarter, from income of USD8 million a
year earlier.
Visteon's adjusted EBITDA fell to a loss of USD3 million in the
second quarter, compared with USD46 million in second quarter
2019.
In the company statement, president and CEO Sachin Lawande
said, "Visteon took decisive actions in the second quarter to
reduce its cost base in response to decreased automotive industry
activity. Despite the challenging environment, we launched 21 new
products during the first half of the year, including all-digital
clusters, a new Android-based infotainment system and large
displays. We also won USD1.7 billion in new business in the first
half, which will position us for continued market outperformance in
the future."
The benchmark September robusta coffee contract set a fresh
7-1/2-month high of USD1,381 a ton on Thursday before settling at
USD1,340 a ton, down USD4 on the day. The market was supported by
news of a fresh coronavirus outbreak in top producer Vietnam which
is facing tight supplies at the end of the season anyway.
Second-month November finished USD2 lower at USD1,356 a ton, while
the back months ended between flat and up USD4. Trading volume rose
to 29,314 lots from 21,435 a day earlier amid suspected activity by
speculators. Arabica futures in New York continued to post strong
gains amid concern over an adverse effect of the global COVID-19
pandemic on coffee production in the upcoming 2020/21 harvests in
Latin America. That said, the most-active September arabica
contract added another 3.75¢ to settle at 115.35¢/lb, after rising
as high as 117.40¢/lb earlier in the session, the highest since
mid-April. The intraday low was hit at 112.20¢/lb. Second-month
December also gained 3.75¢ to settle at 118.25¢/lb, while the rest
of the board gained between 2.55 and 3.55¢ with the gains the
higher the nearer the delivery period was. Trading volume increased
to 77,964 contracts from 66,227 a day earlier. The gains in the
arabica market elevated the arabica premium over robusta to a
2-1/2-month high of 54.57¢/lb, up from 50.64 a day earlier. (IHS
Markit Food and Agricultural Commodities' Stefan Uhlenbrock)
Europe/Middle East/ Africa
European equity markets closed lower across the region for the
second consecutive day; Spain -1.7%, UK -1.5%, France -1.4%, Italy
-0.7%, and Germany -0.5%.
10yr European govt bonds closed lower across the region; Italy
+4bps, Germany/France/UK +2bps, and Spain +1bp.
iTraxx-Europe flat/61bps and iTraxx-Xover flat/377bps, which is
+2bps and +31bps, respectively, week-over-week.
Brent crude closed +0.6%/$43.52 per barrel.
Following a (slightly upwardly revised) record 3.6%
quarter-on-quarter (q/q) contraction in the first quarter of 2020,
eurozone GDP contracted by 12.1% q/q in the second quarter, broadly
in line with market consensus expectations according to Refinitiv
(-12.0%) and IHS Markit's forecast (-11.9%). On a year-on-year
(y/y) basis, GDP dropped by 15.0% in the second quarter following a
decline of 3.1% in the first. (IHS Markit Economist Ken Wattret)
To put these huge falls into perspective, the previous record
contractions in eurozone GDP were 3.2% q/q and 5.7% y/y in the
first quarter of 2009 amid the global financial crisis (see first
chart below).
Eurostat's "preliminary flash" estimate is based on the data of
16 of 19 member states, covering 93% of eurozone GDP; given the
exceptional circumstances of the COVID-19 virus pandemic,
subsequent revisions are likely. The subsequent "flash" estimate
for the second quarter will be released on 14 August, along with
the first estimate of employment in the quarter, although a
breakdown by expenditure component will follow only on 8
September.
National releases and higher-frequency data already available
suggest another quarter of broad-based weakness, reflecting the
most intensive phase of COVID-19 virus-related restrictions, with
private consumption, business investment, and exports all likely to
have collapsed.
In the larger member states, there were huge declines across
the board but significant variations. Germany outperformed, as
predicted, although its 10.1% q/q decline was larger than expected,
as was the collapse in Spain (-18.5% q/q). France (-13.8% q/q) and
Italy (-12.4% q/q) saw smaller-than-expected q/q declines, although
both were still record contractions by some distance.
The National Statistics Institute (Instituto Nacional de
Estadística: INE) reports that Spain endured its first recession
since the third quarter of 2013 in the first half of this year.
Specifically, the economy shrank by a record 18.5% quarter on
quarter (q/q) in the second quarter, after a 5.2% q/q drop in the
first, the biggest GDP loss since the second half of 2013. (IHS
Markit Economist Raj Badiani)
In annual terms, the economy was down by 22.1% year on year
(y/y) in the second quarter, after a 4.1% y/y drop in the
first.
The fall in economic activity during the lockdown was greater
in Spain than in the eurozone as a whole, owing to more stringent
anti-contagion measures and its large and exposed tourism and
hospitality sectors.
The GDP losses in the second quarter were sharper than
expected, with IHS Markit estimating that real GDP shrank by 16.1%
q/q and 19.9% y/y.
The expenditure breakdown reveals that the anti-contagion
measures triggered a sizeable domestic demand shock in the second
quarter.
Consumer spending fell more markedly owing to the closure of
leisure establishments, accommodation, and non-essential retail
premises for part of the second quarter, declining by around 25%
both over the quarter and the year.
Household incomes were affected, with the lockdown triggering a
wave of job losses despite extensive government support
schemes.
Not surprisingly, the measures and precautions to contain the
COVID-19 virus outbreak and public health concerns decimated
household confidence. As a result, Spanish households are saving
more, partly driven by greater fears around future job
security.
Fixed investment contracted markedly during the second quarter,
by 21.9% q/q and 25.8% y/y. A breakdown by asset reveals a
broad-based and severe decline, led by a collapse in construction
of dwellings and other buildings and structures alongside markedly
lower spending on machinery and equipment. The industrial climate
was notably more challenging, partly due to a collapse in corporate
financials and plunging manufacturing activity.
Net exports were a drag on activity, with exports and imports
falling by 33.5% q/q and 28.8% q/q, respectively.
French GDP collapsed by 13.8% quarter on quarter (q/q) during
the second quarter of 2020, according to a seasonally adjusted
"flash" estimate released by the National Institute of Statistics
and Economic Studies (Institut national de la statistique et des
études économiques: INSEE). Output is now estimated to have fallen
by 5.9% q/q during the first quarter, revised from a previous
estimate of a 5.3% q/q decline. The economy has now contracted for
three consecutive quarters. (IHS Markit Economist Diego Iscaro)
On a year-on-year (y/y) basis, GDP declined by 19.0% during the
second quarter. Both the q/q and y/y declines are the strongest in
the post-war period.
Unsurprisingly, domestic demand was badly hit following the
implementation of a strict lockdown between mid-March and mid-May
in response to the COVID-19 virus outbreak. Private consumption
fell by 11.2% q/q in the second quarter, dragged down by a sharp
decline in consumption of services (-15.3% q/q). Consumption of
goods dropped by a more moderate 7.1% q/q. Public consumption fell
by 8.0% q/q.
Investment spending was also severely affected by a combination
of the lockdown, falling demand, and a general increase in
uncertainty, declining by 17.8% q/q. Construction activity was
particularly hit as building sites had to suspend their activities
during the confinement period (-26.2% q/q), while investment in
manufactured goods shrank by 23.1% q/q.
Plummeting external demand, and the impact of the lockdown on
production and some services (e.g., tourism), led to a 25.5% q/q
fall in exports of goods and services. The INSEE mentioned that
exports of transport equipment fell particularly strongly during
the second quarter. Meanwhile, imports of goods and services
declined by 17.3% q/q.
More encouragingly, figures also released by the INSEE show
that consumption of goods (which accounts for around one-third of
total consumption) rose by 9.0% month on month (m/m) in June. This
followed an increase of 37.4% m/m in May. Consumption of goods,
which had collapsed by 16.0% m/m and 18.7% m/m in March and April,
respectively, is now 2.3% above its February pre-COVID-19
level.
Groupe PSA has announced a new electric vehicle (EV) platform
that will underpin its larger electrified future model ranges,
according to a company press statement. The new architecture will
be known as eVMP and will be used for future EV model ranges in the
C and D segments with sedan, sport utility vehicle (SUV), and
crossover body styles in all the major global markets in which the
automaker operates. The architecture will support battery-pack
energy of between 60 and 100 kWh, with the cells packed into the
floor of the platform. PSA says that by offering 50 kWh per meter
within the wheelbase, which is increasingly seen as a benchmark in
the EV market, it will be able to offer vehicles with a competitive
all-electric range of between 400 km and 650 km on the Worldwide
harmonized Light vehicles Test Procedure (WLTP) cycle. The new
platform will complement smaller sub-C-segment models based on the
e-CMP platform, with this architecture and the new eVMP
architecture underpinning the vast majority of PSA's EV offerings
over the next decade. (IHS Markit AutoIntelligence's Tim
Urquhart)
According to its flash release, ISTAT estimates that the
Italian economy shrank by 12.4% quarter on quarter (q/q) in the
second quarter and was 17.3% smaller than a year earlier. (IHS
Markit Economist Raj Badiani)
This implies that Italy remains in a technical recession
(defined as two successive quarters of q/q decline) after it
contracted by 5.4% q/q in early 2020 and 0.2% q/q in the fourth
quarter of 2019.
ISTAT has not provided a detailed breakdown but has confirmed
severe falls in value added in industry and services. On the
expenditure side, it reports anticipated negative contributions
from both domestic demand and net exports.
This is broadly in line with IHS Markit's second-quarter
assessment in our July update, when we estimated that real GDP
shrank by 13.0% q/q and 17.8% year on year (y/y).
Growth should return from the third quarter of 2020 in line
with the steady lifting of the COVID-19 virus-related lockdown. The
economy is likely to expand by around 6.0% q/q in the third quarter
and by 2.8% q/q in the fourth.
Italian brake manufacturer Brembo has announced that it has
raised its stake in Pirelli to almost 5%. In a statement made as
part of its first-half 2020 financial results, the company said
that its stake in the tire-maker now stands at 4.99%, with shares
acquired by Brembo directly and through its parent company Nuova
FourB. It added that the acquisition was undertaken as a
"long-term, non-speculative approach". (IHS Markit
AutoIntelligence's Ian Fletcher)
Asia-Pacific
Most APAC equity markets closed lower except for China +0.7%;
Japan -2.8%, Australia -2.0%, South Korea -0.8%, Hong Kong -0.5%,
and India -0.3%.
Japan's unemployment rate fell to 2.8% in June from 2.9% in
May, thanks to an increase in the number of self-employed from the
previous month, but the number of non-regular employees continued
to decline in line with rising unemployment because of severe
circumstances of employers or businesses. Declines in the number of
employees in life-related services, accommodations, and drinking
and eating services remained the major factor behind weak labor
demand. (IHS Markit Economist Harumi Taguchi)
Thanks to the reopening of businesses, new job openings for
June rose month-on-month for a second consecutive month, but the
year-on-year contraction widened to 27.4%. A faster increase in new
applications lowered both the ratio of active job openings to
active job applications (to 1.11) and the ratio of new openings to
new applications (1.72).
Weak employment conditions also weighed on consumer sentiment.
The Consumer Confidence Index improved 1.1 points to 29.5 in July
but remained below the March level. The employment sub indicator
rose only 0.8 point to 21.7.
Japan's index of industrial production (IIP) rose by 2.7% month
on month (m/m) in June, the first increase in five months, but a
16.7% quarter-on-quarter (q/q) drop in the second quarter was the
largest contraction since the first quarter of 2019. (IHS Markit
Economist Harumi Taguchi)
Manufacturers' shipments rose by 5.2% m/m in June, outpacing
the rebound in the IIP and contributing to the third straight month
of decline in inventory, while the index of inventory ratio
declined by 7.0% m/m following three consecutive months of
increase.
The improvement in the IIP largely reflected solid rebounds in
vehicle production (up 28.9% m/m) and production machinery (thanks
to the resumption of production after the lifting of the COVID-19
virus-related state of emergency), easing supply-chain disruption,
and increases in orders. Inventory declined in a broad range of
industry groupings, particularly for vehicles and electric parts
and devices.
Industry expects solid recoveries in production to continue in
June (up 11.3% m/m) and July (up 3.4% m/m), driven by transport
equipment, chemical products, electric products and parts, and
general-purpose and business-oriented machinery. However, even if
the actual results match the industry outlook, the level of
production could remain below the March level.
Japanese vehicle production witnessed another sharp decline in
May due to the impact of the COVID-19 virus outbreak. Volumes
totaled 308,061 units in the month, down 61% year on year (y/y),
according to figures released by the Japan Automobile Manufacturers
Association (JAMA). The figure includes passenger vehicles, trucks,
and buses. (IHS Markit AutoIntelligence's Isha Sharma)
Output in the passenger car category reached 251,384 units
during the month, down 63% y/y. Within the passenger car category,
production of standard cars with an engine displacement of more
than 2.0 liters fell by 71.3% y/y to 122,179 units, while output of
small vehicles was down by 37.7% y/y to 80,401 units.
Production of minivehicles, categorized as vehicles equipped
with engines smaller than 660cc, was down by 60% y/y to 48,804
units.
Similar declines were witnessed in the truck and bus segments:
49% y/y to 54,356 units and 77.3% y/y to 2,321 units, respectively.
In January-May, Japanese vehicle production declined by 25.4% y/y
to just under 3.1 million units.
Output in the passenger car category reached 2.6 million units
during this period, down 25.8% y/y, while truck production declined
by 22.8% y/y to 414,082 units and bus output fell by 22.2% y/y to
37,178 units.
Japan's production of commercial animal feed increased by 1.4%
in 2019. The Japanese Ministry of Agriculture, Forestry and
Fisheries (JMAFF) reported around 24.1 million tons of commercial
animal feed production took place in fiscal 2019 (ended March 31,
2020). In 2019, chicken feed production rose by 0.7% to 10.3
million tons. This segment was aided by the lack of any serious
diseases such as avian influenza in Japan during 2019. Pig feed
production increased by 1.7% to 5.6 million tons. This was despite
48 cases of classical swine fever (CSF) in several areas of Japan
over the course of the year. Dairy and beef cattle feed production
went up by 1.7% and 1.9% to three million tons and 4.5 million
tons, respectively. Last year, the Japanese commercial feed sector
saw a decline in production. This was the first annual drop after
three consecutive years of increases. However, growth has been slow
over the last seven years. The table below shows feed production
was only up 0.3% between 2012 and 2019. (IHS Markit Animal Health's
Dr Atsuo Hata)
Mazda has reported its financial results for first quarter
(ended 30 June 2020) of the fiscal year (FY) 2020/21, recording a
net loss of JPY66.7 billion (USD635 million). (IHS Markit
AutoIntelligence's Abby Chun Tu)
Mazda's net loss during the reporting period between 1 April
and 30 June 2020 compares with a net profit of JPY5.24 billion in
the corresponding period of the previous year.
Mazda's operating loss during the first quarter of FY 2020/21
totaled JPY45.3 billion, compared with operating income of JPY7.0
billion in the same period of FY 2019/20.
Mazda sold 244,000 vehicles during the reporting period, down
30.8% year on year (y/y). The automaker's sales in North America
fell by 18.8% y/y to 81,000 units, while sales in Japan fell by
33.9% y/y to 26,000 units.
Mazda's sales in Europe were hit hard in the reporting period,
plunging 58.3% y/y to 28,000 units. China represents the only sales
market in which Mazda experienced growth during the reporting
period.
The automaker's sales volumes in the country rose by 13.2% y/y
to 61,000 units in the first quarter of FY 2020/21. The automaker
expects its global sales volume to fall by 8.4% y/y to 1.3 million
units in FY 2020/21.
China's official manufacturing purchasing managers' index (PMI)
was 51.1 in July, up 0.2 point from June - the fifth consecutive
month above the 50 expansionary threshold since the pandemic
outbreak. (IHS Markit Economist Yating Xu)
Sentiments improved across production and demand as output
sub-index recorded the highest July figure since 2015 and new
orders sub-index rose for the third straight month.
New export orders improved by 5.8 percentage points and imports
improved by 2.1 percentage points, although both were still below
the expansionary threshold.
Sub-index of purchased material prices continued to rise with
oil price recovery.
Sub-index of finished goods stocks rose again following two
consecutive months of decline.
By sector, production PMI expanded in all 21 surveyed
manufacturing sectors except persistent contraction in the chemical
sector. Textile and lumber manufacturing reported the first
expansion since February. From the demand side, manufacturing of
paper and printing, electrical machinery, and computers led the
recovery.
Manufacturing PMI showed continuous divergency in different
scale of enterprises with large and medium-sized firms leading the
recovery while sentiment in small firms further deteriorated.
China's non-manufacturing PMI edged down by 0.2 point to 54.2
in July, entirely owing to the slowdown in services, while
construction accelerated.
Construction PMI rose by 0.7 point to 60.5 in July and the
construction employment and expectation index stayed above 55 for
four straight months.
Service PMI declined by 0.3 points to 53.1 as new orders and
employment weakens.
The good news was that household services and culture and
entertainment returned to expansion for the first time since
February under a series of consumption-driven policies across the
country.
The composite output PMI, covering both manufacturing and
non-manufacturing sectors, came in at 54.1, down from 0.1 point
from the previous reading.
Thailand's industrial production, on a seasonally adjusted
basis, rose by 5.7% month on month in June, which softened the
year-on-year (y/y) contraction to 17.8%, from 23.5% y/y in May. The
improvement largely reflected softer contractions in production of
motor vehicles, electrical equipment, and coke and refined
petroleum products. (IHS Markit Economist Harumi Taguchi)
The increase in production was thanks to improved domestic
demand in line with easing COVID-19 containment measures. A rise in
sales of commercial and passenger cars contributed to a recovery in
production of motor vehicles.
The private consumption index suggests only a modest recovery
of private consumption in the second quarter, largely because of
sluggish spending on durables and services.
Thailand's exports declined at a faster pace in June, recording
a 24.6% y/y decrease, while the contraction of imports softened to
18.2% y/y, from a 34.2% y/y drop in May.
Although Thailand's exports to China and the United States rose
12.2% y/y and 14.7% y/y, respectively, exports to Association of
Southeast Asian Nations (ASEAN) countries, the European Union, and
Japan remained sluggish.
Posted 31 July 2020 by Chris Fenske, Head of Fixed Income Research, Americas
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