The PMI"s manufacturing output sub-index, however, slowed down to 50.7, a 0.6-point drop from September. Readings above 50 signal expansion. The October flash reading represents about 85 to 90 percent of mostly small and midsize Chinese manufacturers that participate in HSBC's monthly survey. HSBC will release final October PMI data on Nov. 3. The preliminary reading beat economists' expectations of no growth this month for China manufacturing. The marginal growth put many analysts at an uneasy assurance, including HSBC's chief economist for China and co-head of Asian economic research, Hongbin Qu. "Domestic as well as external demand showed some signs of slowing, although both remained in expansion territory," Qu said. "While the manufacturing sector likely stabilized in October, the economy continues to show signs of insufficient effective demand."
With domestic demand in China suffering, most of the new orders activity for the nation's manufacturers is coming from overseas, but growth in export orders weakened this month, according to the HSBC flash data. "The sub-indices for new orders and new export orders both lost momentum," said Barclays analyst Jian Chang. "Overall, although the improvement in the PMI is reassuring, the drivers of growth continue to come from the external sector; domestic activity remains soft." Still, the new export orders sub-index remained at its highest levels since March 2010. But a stubborn lull, with growth barely above the break-even level, has characterized overall operating conditions in China's manufacturing sector since late summer. Since a 16-month high in July, production output from Chinese factories has slowed to a five-month low. Job shedding across the sector appears headed for a 12th successive month, as the employment sub-index remained below 50 despite a mild improvement.
The amount of backlogged work, meanwhile, continued its modest climb for the fifth straight month but is adding capacity pressures as manufacturers continue to downsize. China's economy grew 7.3 percent in the third quarter. While that is still robust by global standards, it was a 0.2 percent decline from the second quarter and the slowest expansion rate for the country since 2009. The central government is maintaining a target growth rate of 7.5 percent for this year. Meanwhile, according to Markit Economics, the U.S. manufacturing sector began the fourth quarter with a shudder, as new business growth this month skidded to its slowest pace since January. The 56.2 October Flash U.S. Manufacturing PMI reading was 1.3 points lower than September's 57.5 measure. Markit Economics said that although the PMI is "still comfortably above the neutral 50 value, the index was the lowest since July and notably weaker than the average seen during the third quarter (57.1)."
The flash reading was dragged down by a marked decrease in new orders, with growth in export orders slowing to a three-month low. Production output among U.S. manufacturers grew at its weakest pace in seven months, while the rate of output growth has moderated for a second straight month, the first back-to-back slowdown since May 2013. August's PMI of 57.9 was the highest since April 2010. Chris Williamson, Markit's chief economist, called the flash report "a mixed picture." While export orders are keeping China's manufacturing sector afloat, weaker demand in that country and in the Eurozone is showing signs of impact on U.S. exports. "The source of the slowdown appears to be weaker economic growth in key [export] markets," Williamson said. "Many companies reported that domestic demand remains reassuringly strong."
Williamson said even with a slower growth rate, the U.S. manufacturing sector should drive solid growth for the domestic economy in the fourth quarter. But weaker new orders "may translate into a further slowdown in coming months," he cautioned. For more stories like this visit Industry Market Trends Equipment Finance Executives Stay Upbeat Confidence among equipment finance business leaders remained buoyant in October as they expect business conditions and loan and lease demand to be propped up by a seasonal upswing over the next four months. "Application volume has been solid this past quarter," said David Schaefer, CEO of Mintaka Financial LLC. "We expect exceptional year-over-year fourth quarter growth to be greater than 50 percent." The Equipment Leasing & Finance Foundation's Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) rose to 60.4, a climb of 0.2 points from September. Still, the latest MCI-EFI suggests industry executives are bracing for a momentum slowdown in early 2015 once the seasonal cycle is over. It has been a fits-and-starts year for the equipment finance industry based on the MCI-EFI's monthly results.
After the number of executives in the survey who believe business conditions will improve over the next four months doubled to 36.4 percent in September, those who felt the same way this month made up just 23 percent of survey respondents. Similarly, the number of executives who believe demand for capital expenditure loans and leases will increase over the next four months fell back down after a 9.1-point spurt in September, ending at 25.7 percent of respondents. Compared with September's results, there were more executives this month who felt conditions over the next several months, including lease and loan demand, business conditions, and the U.S. economy, will continue to plod along at the same pace. "At this point, I look for little change in the demand for equipment financing," said Thomas Jaschik, president of BB&T Equipment Finance. "The economy has not gained sufficient momentum to warrant any significant change in equipment finance activity."
The latest round of sentiment swing followed a separate report by the Equipment Leasing and Finance Association that showed a 31 percent surge in new business volume for the industry in September. According to the group's Monthly Leasing and Finance Index, last month's overall new business volume of $9.4 billion was up 21 percent compared with September 2013. The big month quickened the year-to-date pace of new business expansion over last year from 6 percent to 8 percent. The index is a composite of activity reported by 25 companies representing a cross-section of the equipment finance industry.
The Equipment Leasing and Finance Association is the parent organization of the Equipment Leasing & Finance Foundation. "Continued growth in September quarter-end new business volume was both expected and encouraging based on the year-to-date momentum and historically strong performance for this period in the equipment finance sector," said William Henak, president and CEO of TCF Equipment Finance. "Concern for the rest of the year remains due to the growing number of negative news headlines, volatile capital and equity markets, unresolved tax extender legislation, and the potential for Federal Reserve actions that may influence interest rates." While Henak said these factors could negatively impact new business volume in the historically strong fourth quarter, he expects this year to finish strong. "The upcoming elections should provide some insight into the mindset of the American public and will hopefully provide some clarity to the business community," said Valerie Hayes Jester, president of Brandywine Capital Associates.
Metal Forming Shops Anticipate Softening Metal forming manufacturers expect new orders to slow down and the business climate to remain stagnant over the next three months, according to the October Business Conditions Report by the Precision Metalforming Association. The October report, based on feedback from 121 metal forming companies, shows a 5 percent increase in the number of companies that expect incoming order levels to drop over the next three months. Companies that expect no growth in orders fell 3 percent, and those that expect orders to rise declined 2 percent. Metal forming companies also see generally flat business conditions over the three-month period. Fifty-five percent of PMA respondents said activity will remain unchanged, up 4 percent compared with September, though the number of businesses that forecast a decline in conditions was 2 percent lower month over month. “Results show that the metal forming industry continues to reflect general economic trends in the United States, demonstrating a mixed outlook for future business conditions,” said William E. Gaskin, PMA's president, who characterized the current pace of growth as "moderate." Average daily shipping levels saw a net rise this month, as manufacturers continued to work through existing bookings.
While the number of businesses that saw shipping levels unchanged from three months ago rose 10 percent in October, only 14 percent of companies reported lower shipping levels than the prior three months, an 11 percent improvement from September, when one in four respondents indicated a decline in shipments. Shipping activity is also primarily up from a year ago, PMA data shows. Meanwhile, average lead times compared to those three months ago improved slightly, as the number of companies that quickened their turnaround rose 2 percent in. That came in tandem with a 2 percent decrease among manufacturers that had longer lead times. Business for metal forming companies this year has been generally higher than 2013, based on a 7 percent year-over-year expansion in shipment activity, which peaked in August. However, the PMA data shows that new orders have been on a gradual but steady decline this year to date, aside from a small peak in August. The PMA represents the $113 billion North American metal forming industry of stamping, fabricating, spinning, slide forming, and roll forming. Its nearly 900 member companies include suppliers of equipment, materials, and services in the United States and Canada. Read More at ThomasNet This article was originally published on ThomasNet News Industry Market Trends and is reprinted in its entirety with permission from Thomas Industrial Network. For more stories like this please visit Industry Market Trends.