NEW$ & VIEW$ (1 APR. 2015)

Wal-Mart Presses Suppliers to Cut Prices Wal-Mart is telling suppliers to forgo investments in joint marketing with the retailer and plow the savings into lower prices instead.

Makers of branded consumer products from diapers to yogurt typically earmark a portion of their budgets for marketing with Wal-Mart, spending on things like eye-catching product displays and online advertisements.

Wal-Mart has long had a reputation for pressing its suppliers to cut costs to help lower prices, but the retailer’s new leadership has embraced the concept with fresh vigor. (…)

With the growth of dollar stores and other discounters, Wal-Mart is facing ever more competition on price, which for many customers is the most important selling point. (…)

OPEC oil output hits highest level since October

OPEC supply has risen in March to 30.63 million barrels per day (bpd) from a revised 30.07 million bpd in February, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants. (…)

Besides Saudi Arabia, the main reasons for the rise are the resolution of involuntary outages – Iraq lifted exports due to improved weather and Libya managed to nudge production higher despite unrest.

If the total remains unrevised at 30.63 million bpd, March’s supply would be OPEC’s highest since 30.64 million bpd in October, 2014, based on Reuters surveys. (…)

Based on this survey, Iraq’s exports have come close to December’s record high of 2.94 million bpd, depending on whether tankers at the southern ports earlier on Tuesday actually depart in March. Iraq was hoping to reach 3 million bpd of exports this month.

Saudi Arabia has increased output to within a whisker of 10 million bpd on average in March, sources in the survey said, due to higher demand from export customers and an increased local requirement in new oil refineries. (…)

Of countries with lower output in March, the biggest decline was in Angola, partly due to a force majeure on exports on BP’s Saturno crude stream. OPEC’s other West African producer Nigeria also exported fewer cargoes in March.

Iran, West Close to Deal But Hurdles Remain Senior Western officials warned significant hard work lay ahead on the outlines of a final nuclear deal between Iran and six world powers, although they remained hopeful an agreement could be reached.

U.S. MANUFACTURING PMI, ORDERS ACCELERATE; OR DID THEY?

From Markit:

March data pointed to a positive month for U.S. manufacturing business conditions, with momentum building again after a slowdown at the turn of the year. This was highlighted by stronger rates of output and new business growth, alongside sustained job creation during the latest survey period. New export sales remained a source of weakness in March, partly reflecting the stronger exchange rate. Meanwhile, input costs decreased for the third month running, which led to the weakest rise in factory gate charges since May 2014.

At 55.7 in March, up from 55.1 in February, the seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered above the 50.0 no-change threshold, thereby signalling an overall upturn in business conditions. The latest survey indicated a robust and accelerated expansion of manufacturing production levels. Anecdotal evidence cited stronger inflows of new business and improving domestic economic conditions. That said, the overall rate of output growth remained slower than the peaks seen last summer.

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Volumes of new work also increased at a strong pace in March, with the latest upturn the fastest for six months. The launch of new products, successful marketing initiatives and greater underlying client demand were all cited as factors supporting new order growth. However, new export sales stagnated during the latest survey period, thereby ending a three-month period of modest expansion.

Manufacturers indicated greater pressure on operating capacity in March, as highlighted by a robust and accelerated rise in backlogs of work. The latest increase in unfinished work was the most marked since September 2014. Efforts to boost production schedules, as well as positive sentiment towards the business outlook, contributed to further job creation in March. The latest upturn in payroll numbers was the steepest for four months.

Suppliers’ delivery times lengthened in March, as has now been the case for 21 consecutive months. However, the rate of deterioration eased markedly since February, which some firms linked to better weather conditions and an alleviation of delays related to West Coast port strikes. Meanwhile, average cost burdens decreased at the most marked pace since June 2009, with manufacturers mainly citing lower raw material and energy prices.

Large manufacturers (500+ employees) recorded an especially sharp pace of output growth in March. Job creation was broad-based by company size, with the fastest rate of staff hiring seen at medium sized manufacturers (100-499 employees). By market group, consumer goods producers posted by far the steepest increase in output levels, followed by intermediate goods producers. Investment goods producers recorded the slowest rises in output and new business volumes in March.

The ISM:

The March PMI® registered 51.5 percent, a decrease of 1.4 percentage points from February’s reading of 52.9 percent. The New Orders Index registered 51.8 percent, a decrease of 0.7 percentage point from the reading of 52.5 percent in February. The Production Index registered 53.8 percent, 0.1 percentage point above the February reading of 53.7 percent. The Employment Index registered 50 percent, 1.4 percentage points below the February reading of 51.4 percent, reflecting unchanged employment levels from February. Inventories of raw materials registered 51.5 percent, a decrease of 1 percentage point from the February reading of 52.5 percent. The Prices Index registered 39 percent, 4 percentage points above the February reading of 35 percent, indicating lower raw materials prices for the fifth consecutive month. Comments from the panel refer to continuing challenges from the West Coast port issue, lower oil prices having both positive and negative impacts depending upon the industry, residual effects of the harsh winter, higher costs of healthcare premiums, and challenges associated with the stronger dollar on international business.”

Of the 18 manufacturing industries, 10 are reporting growth in March in the following order: Paper Products; Wood Products; Transportation Equipment; Fabricated Metal Products; Nonmetallic Mineral Products; Machinery; Chemical Products; Primary Metals; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The seven industries reporting contraction in March — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Plastics & Rubber Products; and Furniture & Related Products.

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EUROZONE PMI, NEW ORDERS ACCELERATE

Growth of eurozone manufacturing production accelerated to a ten-month high in March, underpinned by the fastest expansion of incoming new business since April of last year. With the performance of the sector strengthening further, companies raised employment at the quickest pace for over three-and-a-half years.

At 52.2 in March, up from 51.0 in February, the final seasonally adjusted Eurozone Manufacturing PMI® was above its earlier flash estimate of 51.9. The PMI currently stands at its highest level for ten months and has remained in expansion territory since July 2013. (…)

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March saw the sharpest increase in new export orders since April 2014, with growth registered in Germany, Italy, Spain, the Netherlands and Ireland. Companies reported that the weaker euro was the main factor driving new export orders higher. (…)

CHINA MANUFACTURING PMI CONTRACTS IN MARCH

After a marginal improvement in February, operating conditions faced by Chinese manufacturers deteriorated slightly in March. Total new orders declined for the first
time since December, albeit marginally, which contributed to a slower expansion of output. Meanwhile, employment continued to decline in March, with the pace of job shedding picking up to the sharpest in seven months. On the costs front, deflationary pressures remained strong, with average input prices falling markedly, while prices charged by manufacturers declined for the eighth month running.

After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) posted at 49.6 in March, up slightly from an earlier flash reading of 49.2. However, this was down from 50.7 in February and signalled a renewed deterioration in the health of the sector. The drop in the headline index was partially driven by a fall in new business received by manufacturers during March. Though the rate of contraction was only slight, it was the first time that new orders had declined in three months. Anecdotal evidence suggested that subdued market conditions had dampened client demand both at home and abroad. Furthermore, new export work fell for the second month running, albeit at a fractional pace.

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Manufacturing production increased for the third month running in March. However, the rate of expansion eased since February as a result of softer client demand.
Staffing levels declined again in March, thereby extending the current trend to 17 months. Moreover, the rate of job shedding accelerated to the sharpest for seven months, with some companies linking lower workforce numbers to company downsizing policies.

Reduced employment contributed to a further rise in backlogs of work in March, though the rate of accumulation was the slowest since last November. Purchasing activity increased only fractionally in March, with a number of companies attributing the slower rate of growth to sufficient stocks at their units. Inventories of both post- and pre-production goods declined in March, following increases in the previous month.

Manufacturers continued to report a solid decline in input costs in March, despite the rate of reduction easing to the weakest for six months. Output charges also declined again in March, albeit at the slowest rate since last August.