U.S. Business Activity Increases in Early 2020 -- 4th Update
January 24 2020 - 1:22PM
Dow Jones News
By Paul Hannon and Harriet Torry
Business activity in the U.S. improved in early 2020,
contrasting with weaker economic performance in some of the world's
other major economies.
Data company IHS Markit said Friday that its composite
purchasing managers index for the U.S., a measure of activity in
businesses, posted a 10-month high of 53.1 in January, up from 52.7
in December. A level above 50 points to growth in business
activity, while a reading below that mark points to
contraction.
IHS Markit said the pickup was due to growth in the services
sector. Manufacturing PMI dipped to 51.7 in January, from 52.4 a
month earlier.
The data "highlight a manufacturing sector that is not out of
the woods yet, with goods producers seeing only modest gains in
output and new orders," said IHS Markit economist Sian Jones.
In Asia, Japan saw an uptick in business activity, according to
a separate Markit survey, signaling a return to growth after a weak
end to 2019.
By contrast, Europe's economy remained a global weak spot as
2020 got under way, with its services sector losing momentum while
factories saw export orders begin to stabilize after a long and
deep decline.
"The U.S. has been doing better than either of those economies
for a long time and I expect that to continue," said Stephen
Stanley, chief economist at Amherst Pierpont.
Still, "as trade tensions ratchet down in 2020, not only will
China and the U.S. economies do better but also those that are
closely tied to trade" like Germany, he said.
IHS Markit's surveys of purchasing managers at businesses around
the eurozone pointed to continued weakness in activity during
January, according to figures released Friday. The composite
purchasing managers index, a measure of activity in the
manufacturing and services sectors, was unchanged at 50.9.
The currency area's manufacturing sector continued to contract,
but more slowly than in previous months, while new orders were only
slightly down on the previous month.
In Europe, Germany has been hardest hit by the slowdown in
overseas demand since the start of 2018, but the surveys indicated
that new export orders fell only slightly in January, and less
sharply than for 15 months. Its PMI rose to a five-month high, but
other parts of the currency area were close to stagnation.
Speaking at the World Economic Forum's meeting in Davos,
Switzerland, German Finance Minister Olaf Scholz said recent
developments would help underpin "a very stable economic
development."
"We are happy with the reduction in trade tensions," he said.
"It will have an effect on our export-oriented industries."
The trade truce between the U.S. and China may help revive trade
flows this year, but it isn't known how much that will benefit
Europe. Under the phase-one trade agreement, China has committed to
buy an additional $200 billion in U.S. goods across 2020 and 2021.
It may meet that target by cutting its purchases from other
countries.
The outlook for trade with the U.S. is also uncertain. President
Trump has threatened tariffs on imports of autos if the European
Union doesn't agree to a new deal that is more favorable to
American exporters.
The ECB concluded Thursday that rising protectionism still
threatened to slow the eurozone's economy, making it unlikely it
would soon consider a rise in its key interest rate.
A survey of Japanese purchasing managers carried a similar
message to that from Germany, which is also one of the world's
leading exporters. The composite PMI rose to 51.1 from 48.6 in
December. There were signs of a revival in export orders for
manufactured goods, and the manufacturing PMI hit a five-month
high.
In Davos, Bank of Japan Gov. Haruhiko Kuroda said he expected
the economy to record another year of growth in the 1% to 1.5%
range.
"Business investment has been quite robust," he said. "We expect
this strength will continue for some time."
Write to Paul Hannon at paul.hannon@wsj.com and Harriet Torry at
harriet.torry@wsj.com
(END) Dow Jones Newswires
January 24, 2020 13:07 ET (18:07 GMT)
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