Economy in Brief

The manufacturing global PMIs from Standard & Poor’s show deterioration in December compared to November as 2023 draws to a close. The median reading among countries in the table is 47.9, a level below 50 indicating contraction in the manufacturing sector as represented by the median standing. The median in December also declined from its value in November, which was 48.3. In November, previously, the median PMI had declined from its 48.7 reading in October. Slow but steady erosion is still in train over these two months.

Looking at data more broadly over 12 month, six month and three month periods, there's very little change in the median. The median for the 12-month average is at 48.7; that increases to 48.8 over six months but then falls back to 48.4 over three months. The median over these periods has actually been trapped at a low reading below the 50% mark, indicating moderate contraction. There's been a persisting situation over the last year that shows slight erosion and it has not changed very much as the year has progressed.

In addition to the median, we can look at breadth; breadth tells us the proportion of readings with improving or deteriorating trends over some set period. Over 12 months compared to a year ago, the diffusion statistic is 61.1. Since it's over 50, it indicates that more than half of reporting countries were showing improvement on that timeline. Over six months compared to 12 months, diffusion falls to 55.6. That depicts reduced breadth, but it still shows that over half of the reporting countries were improving over six months compared to 12 months. Over three months, the breadth figure falls to 44.4%; this figure is below 50% and indicates that relatively more reporters are showing weakening readings over three months compared to six months.

Ranking data provide more perspective on what these readings mean. Breadth data summarize trends across all reporters. Ranking data evaluate each reporting unit agist its own recent timeline. The ranking data place the current month’s estimate in a queue of data from January 2019. This is a five-year period. Over this span, only five of the eighteen countries (or areas) from the table have standings above their 50th percentile, which means only five of them have standings above their historic medians. The highest queue standing is reported by Russia at the 98.3 percentile mark which is also its the strongest reading over this period. And because it's involved in war, this is probably not a truthful figure on Russia's part. Mexico has a 90-percentile standing. India has a 70-percentile standing; that's based on its November value. South Korea has a 58-percentile standing. However, the median for the group of 18 countries stands only at its 20.8 percentile, right at the lower fifth of its queue of reported data, obviously a very weak reading overall.

Vetting data from just before Covid struck from January 2020 to date, there are only four countries that report improvements in their manufacturing PMIs over this period. Russia, of course, reports the greatest increase at 6.7 points, Mexico shows a 3-point gain, Indonesia reports a 2.9-point gain, and South Korea shows a small 0.2-point gain. The median for the group is a decline of 1.8 points over this period.

Industrial production in Japan fell by 1.3% in November after rising by 2.2% in October. Japan's production profile, however, shows an acceleration is in progress. Over 12 months production falls by 1.2%, over 6 months output is rising at a 3.7% annual rate, and over 3 months it's rising at an even stronger, at a 4.3% annual rate.

Manufacturing: The manufacturing sector echoes the results in the trends of the headline. Manufacturing IP is close to showing acceleration in progress but for a technical shortfall. Manufacturing output falls by 1.3% over 12 months, then it accelerates at a strong 5.6% annual rate, although there's a slight set-back to trend as the 3-month growth rate recedes to 5.2%; the 3-month and 6-month growth rates are nearly identical and much stronger than the year-over-year growth rate. Technically I can't say that this is ongoing acceleration, but it's certainly a strong picture for manufacturing output.

Product Group Performance: Product group results in Japan in November show widespread declines with a decline of 2.2% in consumer goods output, a decline of 0.1% in intermediate goods output, and a decline of 2.2% in investment goods output. All of these are changes, and are, for the most part, reversals, from the output that the sectors reported in October as consumer goods output expanded by over 5%, intermediate goods output expanded by 1.4%, and investment goods output was flat.

Sequential Growth trends by Sector: Checking the sector results for sequential trends and acceleration, we find: • Acceleration in intermediate goods where output falls by 0.9% over 12 months, rises 5% at an annual rate over 6 months, and accelerates to a 5.6% annual rate over 3 months. • Consumer goods show a tendency toward acceleration but do not show a clear unwavering acceleration path. Consumer goods output is up by 1.8% over 12 months; it then recedes, falling at a 4.7% annual rate over 6 months, but it follows that with a surge, growing at a 15.7% annual rate over 3 months. Consumer goods output has a hiccup in between its 12-month and 3-month rates of growth- with that decline over 6 months. • Paradoxically, investment goods are closer to showing ongoing deceleration. Output falls by 5.3% over 12 months, and then falls at a 15.7% annual rate over 6 months. Investment goods trim their loss over 3 months to an 11.4% annual rate of decline, but that's still a decline in double digits. Having double digit declines over 3 months and 6 months definitely is a buzzkill in terms of evaluating trends for Japanese industrial output.

Other Industry: Looking separately at other components of overall industrial production in November, there are increases in mining and in electric and gas utilities output on the order of growth rates of 2 to 2 1/2 percent. In each case, there are reversals of declines in output posted in October. Sequentially, mining output is recovering strongly with output falling 1% over 12 months, rising at a 2.2% annual rate over 6 months, then exploding for a 27.4% annual rate gain over 3 months. Utilities output is more questionable, falling by 0.2% over 12 months, rising over 6 months at only a 0.2% pace, and then falling at a substantial 16.8% annual rate over 3 months. It's hard to understand why electric and gas output falls so strongly over 3 months when other categories of output are all rising solidly or strongly over 3 months; industry clearly needs utilities output to advance. It's very possible that there's some sort of weather effect operating that has retarded the usage of utilities over the last 3 months. It's hard to take utilities out of the context of the report and treat it as something that is authentically weak or worrisome.

Quarter-to-date: In the quarter-to-date, overall output is expanding at a 7.5% annual rate with manufacturing up at 8.2% annual rate. These are data with two-months’ worth of observations in place calculating the two-month average gain over the third quarter base. Sector results for quarter-to-date data show strong gains in consumer goods, as well as intermediate goods and in mining. But there's a significantly strong decline in output in investment goods and an extreme decline in utilities output in the quarter-to-date.

Consumer confidence in Finland fell to -13.3 in December from -12.4 in November. The confidence metric stands in the 2.9 percentile of its historic queue of values. It also stands at its 12-month low, its lowest mark of the year. One year ago, the consumer confidence measure stood at its lowest point on data back to January 2001. While the overall ranking for consumer confidence is improved in 2023 compared to a year-ago, the reading is still low, and momentum is poor.

The assessment of Finland's ‘economy now’ improved slightly to -41.4 in December from -42.5 in November. That's above its 12-month low of -50.3. The progression of averages from 12-month to 6-month to 3-month, doesn't show much ongoing improvement in this metric.

Expectations for Finland's economy in 12 months also improved in December to -16.8 from -19.1 in November. However, the progression of averages from 12-month to 6-month to 3-month does not show improvement in train; it shows deterioration.

Consumer price inflation over the past year improved slightly in December to 4.1 from 4.2 and there has been steady improvement on the inflation front as the year has gone by.

Unemployment in Finland has been steady over the last three months although it deteriorated slightly in December at -31.7 compared to -31.3 in November. The moving averages also show that there has been a gradual deterioration from 12-month to 6-month to 3-month. The personal threat of unemployment ‘now’ shows a sharply weaker number at -14.2 in December compared to -11.5 in November, and the threat of personal employment has been declining as well from 12-month to 6-month to 3-month.

The economic environment shows the favorability of the time to purchase durables deteriorated slightly in December at -25.7 compared to -23.7 in November. The 12-month, to 6-month, to 3-month progression of averages shows a slight ongoing improvement on this metric.

The favorability of time for saving worsened slightly at -13.6 in December compared to -13.4 in November. There has been little movement in this metric, but it has gradually worsened.

The favorability of time for raising a loan balance deteriorated slightly month-to-month and the 12-month, to 6-month, to 3-month sequence shows slight change in this measure.

The household financial situation deteriorated in December, falling to a 16.4 rating from 21.9 in November. The 12-month, to 6-month, to 3-month averages of this metric have been worsening.

Household possibilities to save over the next 12 months were worse in December compared to November. This metric has been sliding from 12-month, to 6-month, to 3-month.

Ranking perspectives The queue percentile rankings show consumer confidence overall at a 2.9 percentile standing, which is quite weak although a slight improvement from what it was a year ago. The economy ‘now’ and the economy in 12 months, both have standings in their 15th to 20th percentiles, up from what they were a year ago, but still clearly quite weak. The assessment of consumer prices shows an improvement in inflation that is down to its 87.7 percentile from its 97.7 percentile one year ago. Unemployment in Finland shows a standing at its 17.8 percentile while the personal threat of unemployment is at its 14.3 percentile; both are sharply lower than what they were a year ago when the standings were in their 40th percentiles, respectively.

The environmental standings showed the favorability of a time to purchase durables has only a 4.7 percentile standing although that's better than it was a year ago. The favorability of time for saving has a 2.2 percentile standing, above what it was a year ago when it was on its all-time low on data back to 2001.

The favorability of the time for raising a loan balance fell to an all-time low in December 2023. Households rate the possibility to save over the next 12 months at a 0.7 percentile standing, extremely weak, and far below what it was one year ago.