{"id":4660,"date":"2023-05-10T14:41:17","date_gmt":"2023-05-10T14:41:17","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=4660"},"modified":"2025-03-27T15:50:39","modified_gmt":"2025-03-27T15:50:39","slug":"capex-weakness-to-drive-pmi-double-dip","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=4660","title":{"rendered":"Capex weakness to drive PMI double dip"},"content":{"rendered":"<p>The global manufacturing PMI new orders index &ndash; a timely indicator of global goods demand &ndash; was little changed below 50 (49.4) in April, a weaker result than had been suggested by DM flash results.&nbsp;<\/p>\n<p>Inventories indices for finished goods and production inputs, meanwhile, rose further to their highest levels since November. Accordingly, new orders \/ inventories differentials &ndash; which often lead at turning points &ndash; fell for a second month.&nbsp;<\/p>\n<p>These results are consistent with the forecast here that a recovery in PMI new orders since December 2022 would fizzle out in H1 and reverse into H2, with a possibility of a break below the December low. The basis for the forecast was a relapse in global (i.e. G7 plus E7) six-month real narrow money momentum around end-2022. Real money momentum moved sideways in March at around its June 2022 low &ndash; see chart 1.<\/p>\n<p><strong>Chart 1<\/strong><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/100523c1.png?__SQUARESPACE_CACHEVERSION=1683718615345\" alt=\"\" \/><\/span><\/span><\/p>\n<p>A downswing in the stockbuilding cycle was a key driver of earlier PMI weakness. A further drag is in prospect but the down phase of the cycle is well advanced, with incoming data and average cycle length suggesting a low during H2.&nbsp;<\/p>\n<p>Business capex is emerging as a new source of global goods demand weakness. The capital goods component of PMI new orders reached a new low in April &ndash; chart 2.&nbsp;<\/p>\n<p><strong>Chart 2<\/strong><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/100523c2.png?__SQUARESPACE_CACHEVERSION=1683718657399\" alt=\"\" \/><\/span><\/span><\/p>\n<p>A contraction in business investment is consistent with a squeeze on real profits in late 2022 &ndash; chart 3 &ndash; and weak corporate money trends: business broad money holdings have fallen in nominal terms recently in the US, Eurozone and UK &ndash; chart 4.&nbsp;<\/p>\n<p><strong>Chart 3<\/strong><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/100523c3.png?__SQUARESPACE_CACHEVERSION=1683718686322\" alt=\"\" \/><\/span><\/span><\/p>\n<p><strong>Chart 4<\/strong><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/100523c4.png?__SQUARESPACE_CACHEVERSION=1683718712541\" alt=\"\" \/><\/span><\/span><\/p>\n<p>Other evidence of a capex downturn includes:&nbsp;<\/p>\n<ul>\n<li>\n<p><span>Weak capex intentions in regional Fed manufacturing surveys (and the NFIB small firm survey) &ndash; chart 5.<\/span><span>&nbsp;<\/span>&nbsp;<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li>\n<p><span>Weak enterprise loan demand for fixed investment in the ECB bank lending survey &ndash; chart 6.<\/span><span>&nbsp;<\/span>&nbsp;<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li>\n<p><span>Falling capital goods \/ machinery orders in the US, Japan and Germany &ndash; chart 7.<\/span><\/p>\n<\/li>\n<\/ul>\n<p><strong>Chart 5<\/strong><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/100523c5.png?__SQUARESPACE_CACHEVERSION=1683718770383\" alt=\"\" \/><\/span><\/span><\/p>\n<p><strong>Chart 6<\/strong><\/p>\n<p>&nbsp;&nbsp;<span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/100523c6.png?__SQUARESPACE_CACHEVERSION=1683718793499\" alt=\"\" \/><\/span><\/span>&nbsp;<strong>Chart 7<\/strong><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/100523c7.png?__SQUARESPACE_CACHEVERSION=1683718826651\" alt=\"\" \/><\/span><\/span><\/p>\n<p>Capex&nbsp;retrenchment is usually accompanied by a fall in labour demand. Adjusted for negative revisions to the prior two months, the addition to US non-farm payrolls in April was 104,000, the smallest since January 2021 &ndash; chart 8. Revisions in the last three reports cumulate to -200,000, a level rarely reached outside recessions &ndash; chart 9.<\/p>\n<p><strong>Chart 8<\/strong><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/100523c8.png?__SQUARESPACE_CACHEVERSION=1683718863662\" alt=\"\" \/><\/span><\/span><\/p>\n<p><strong>Chart 9<\/strong><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/100523c9.png?__SQUARESPACE_CACHEVERSION=1683718888343\" alt=\"\" \/><\/span><\/span><\/p>\n<p>&#8212;&#8211;<br \/>\nCOMMENT:<br \/>\nAUTHOR: David Cotton<br \/>\nEMAIL: mrwbartholomew@gmail.com<br \/>\nIP: 82.132.230.138<br \/>\nURL:<br \/>\nDATE: 05\/10\/2023 02:41:17 PM<\/p>\n<p>When else have we seen broad money contract nominally? <\/p>\n<p>I can only think of one. Will it be different this time? Hopefully!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The global manufacturing PMI new orders index &ndash; a timely indicator of global goods demand &ndash; was little changed below 50 (49.4) in April, a weaker result than had been suggested by DM flash results.&nbsp; Inventories indices for finished goods and production inputs, meanwhile, rose further to their highest levels since November. Accordingly, new orders [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-4660","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4660","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4660"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4660\/revisions"}],"predecessor-version":[{"id":6969,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4660\/revisions\/6969"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4660"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4660"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4660"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}