Weekly Global Update for February 25, 2015

February “Flash” PMI Leading Indicators (Charts 1-4)

Market Economics released Flash PMI leading indicators for the USA, the eurozone, Germany, France and Japan. China’s was delayed until February 25th (perhaps due to the Lunar New Year holidays).

Comments by Chris Williamson, Chief Economist at Markit:

USA

• Factory output growth ticked higher for a second successive month in February, suggesting the goods-producing sector is on course to make a robust contribution to the economy in the first quarter.
• The production upturn occurred despite widespread delivery delays caused by heavy snowfall and port strikes, which may have also been a factor behind the near- stagnation of exports, suggesting the underlying picture may have been one of slightly stronger growth.
• However, the rate of growth remains well down on last year’s peaks, and a slowing of new orders growth to the weakest for just over a year looks to have caused employers to take a more cautious approach to hiring. Worries over Russia and the eurozone also continue to dampen risk appetite.
• The survey therefore adds to the sense that, while still expanding at a solid pace, the U.S. economy has entered a slower growth phase. Policymakers, juggling with the decision as to when the economy can start to withstand higher interest rates, will at least be reassured that lower manufacturing costs, now falling at the fastest rate since mid-2012, should help drive inflation down further in coming months and allow policy to be kept looser for longer if needed.

Eurozone

• February’s PMI surveys paint an upbeat picture of improving eurozone economic health. Undeterred by the ongoing Greek debt crisis, economic growth is gathering momentum and looks set to gain further traction in coming months. The economy is on course to grow by at least 0.3% in the first quarter, assuming March doesn’t disappoint.
• Even more encouraging is the faster rate of job creation reported during the month. Employment is now rising at the steepest rate since 2011 as employers become increasingly confident in the outlook and eager to take on staff to meet rising demand.
• With the ECB’s quantitative easing ‘bazooka’ due to start in March, business optimism has been boosted to its highest for three-and-a-half years.
• Growth is looking lop-sided, however, and very much dependent on the services economy where lower prices are fuelling growth, especially in consumer-facing sectors. The weakness of the manufacturing economy remains a major concern.
• A key development this month is that France is no longer languishing in stagnation. The region’s second-largest economy is now seeing the strongest growth since mid-2011, with French consumers apparently awakened by lower prices.

Japan (by Amy Brownbill, Economist at Markit)

• The latest data signaled an improvement in operating conditions in the Japanese manufacturing sector. Despite a growth slowdown in incoming new orders, manufacturing production growth was solid and unchanged from the previous month. Meanwhile, new orders from international markets increased at the fastest rate since October 2014-driven by the weaker yen.
• However, employment growth weakened for the second successive month in February despite reports of an improving economy.

Source: www.markiteconomics.com

Japan Update

JEITA just released Japanese domestic electronic equipment, component and device production by product type for December.

• December 2014 Japanese electronic equipment production declined 7.5% compared to December 2013. However it increased 24% sequentially from November 2014. For total 2014 it declined 6.3% compared to total 2013 (Charts 5 & 6).
• Semiconductor shipment growth to Japan continues to exceed domestic electronic equipment growth (Chart 7).
• Japanese components and device production totaled 7,511 billion yen in 2014; up from 6,780 billion yen in 2013 (Chart 8).
• Electronic device production was up 21% in 4Q’14 vs 4Q’13 (3/12=1.21) while electronic component production increased 8% in the same time period (Chart 9).
• Domestic printed circuit production declined 2.3% in total 2014 vs. total 2013 (Chart 10) but increased 1.2% in 4Q’14 vs. 4Q’13 (Chart 11).
• Japan’s February PMI leading indicator points to slower PCB growth ahead in the near term (Chart 12).

Source: www.jeita.or.jp

North American Semiconductor Equipment Industry January 2015 Book/Bill Ratio 1.03 (Charts 13 & 14)

North America-based manufacturers of semiconductor equipment posted $1.31 billion in orders worldwide in January 2015 (3-month average basis) and a book-to-bill ratio of 1.03, according to SEMI.

The 3-month average of worldwide bookings in January 2015 was $1.31 billion, 4.9% lower than December 2014 and 2.6% higher than the January 2014.

The 3-month average of worldwide billings in January 2015 was $1.28 billion, 8.6% lower than December 2014 and 3.5% higher than the January 2014.

"2014 was a strong growth year for the semiconductor equipment industry, and both bookings and billings at the start of this year are comparable to the early 2014 figures," said SEMI president and CEO Denny McGuirk. "Given the positive outlook for the semiconductor industry in 2015 and based on current capex announcements, we expect the equipment market to continue to grow this year.”

Source: www.semi.org

Traditional Desktop Workstations Continue to Drive Worldwide Certified Workstations Growth in 2014 (Chart 15)

According to the International Data Corporation the overall certified workstation market maintained its growth momentum in the fourth quarter of 2014 (4Q’14).

Worldwide shipments were up 8.8% year-over-year in 4Q’14 to 946,089 units making this the seventh consecutive quarter of positive growth in a competitive market driven by traditional desktop workstations. For the full year 2014, total worldwide shipments improved significantly to 3.7 million units and 8.9% year-over-year growth compared to annual growth of 2.9% in 2013.

Source: www.idc.com