Malaysia

Malaysia Manufacturing PMI Shows Sixth Month of Contraction. The latest reading of the Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) showed continued worsening in operating conditions for the manufacturing sector, albeit at a slower rate. September headline PMI stood at 48.3, signifying a slower rate of contraction from 47.2 in August. (See Economic Viewpoint: Malaysia Manufacturing PMI)

Government to Announce Slightly Higher Budget for 2016. The government is set to announce a slightly higher budget for 2016 on October 23 compared to that in 2015 given the year is the beginning of the 11th Malaysian Plan, as well as to boost the domestic economy. After taking into account the current situation, Husni said the 2016 budget would see a larger allocation for development expenditure with a reduction in operating expenditure to balance the budget deficit. (Bernama)

Najib Signals Delay in Balancing Budget in Address to Investors. Malaysia may miss a goal to balance its budget by 2020 as a plunge in commodity prices forces the government to cut its projections, according to Prime Minister Najib Razak. The budget shortfall may be "in the region" of 1% of GDP at the end of the decade compared with a current deficit of 3.2%, the New Straits Times reported, citing Najib’s comments to fund managers and investors in New York. The premier reiterated Malaysia won’t impose capital controls or peg the ringgit even as the currency depreciates to a 17-year low. (Bloomberg)

Asia

China’s Official Factory Gauge Stabilizes Near 3-Year Low. China’s official factory gauge stabilized around a three-year low as government stimulus measures showed signs of steadying the weakness in manufacturing. The official PMI climbed to 49.8 in September, the National Bureau of Statistics said Thursday, compared with the median estimate of 49.7 in a survey. A separate PMI gauge from Caixin Media and Markit Economics also showed improvement from its initial reading, with the final September number climbing to 47.2. Excess capacity and factory-gate deflation are pressuring China’s manufacturers, adding headwinds for the government’s 2015 growth objective of about 7%. (Bloomberg)

Indian Manufacturing Growth Slowed to Seven-Month Low in September. Indian manufacturing activity slowed more than expected to a seven-month low in September due to softening demand and output, a business survey showed on Thursday. The Nikkei Manufacturing PMI, compiled by Markit, fell to 51.2 in September from 52.3 in August and against predictions of 52.0. Concerns of slowing growth in global economies, most notably China, showed in the new orders sub-index which fell to a three-month trough and dragged output to its lowest since May 2014. (Reuters)

Indonesian Inflation Cools, but No Room Seen for Interest Rate Cuts. Indonesia's high annual inflation rate cooled in September and should drop more by year-end, but it likely will be 2016 before the central bank can cut interest rates to help an economy growing at its slowest pace in six years. The statistics bureau today said September's annual inflation rate was 6.83%, the lowest since April. It was 7.18% in August. On a monthly basis, the consumer price index declined 0.05% in September, the first drop since February, thanks to lower food prices. (Reuters)

Japan Manufacturing PMI Expands at Slower Pace. Japanese manufacturing activity expanded at a slower pace in September as new export orders tumbled the most in almost three years, a private survey showed on Thursday. The Markit/Nikkei Japan Final Manufacturing PMI stood at a seasonally adjusted 51.0 in September, below 51.7 in August. The index remained above the 50 threshold that separates expansion from contraction for the fifth straight month but fell for the first time in three months. (Reuters)

USA

US Manufacturing Barely Expands as Global Economy Slows. U.S. manufacturers expanded at their slowest pace in two years last month, held back by faltering global growth and cutbacks in oil and gas drilling. The Institute for Supply Management said Thursday that its index of factory activity fell sharply to 50.2 in September from 51.1 in August. That is the lowest level since May 2013. New orders and production both fell sharply and a measure of hiring also declined. All three measures still barely remained in expansion territory. U.S. manufacturers are getting hit by slower growth in China and a stronger dollar. (AP)

Applications for US Jobless Aid Rise, but Remain Near Lows. Applications for unemployment benefits rose last week, but Americans are seeking jobless aid at historically low levels consistent with a healthy job market. The Labor Department said Thursday that weekly applications for jobless aid rose 10,000 to a seasonally adjusted 277,000. The four-week average, a less volatile figure, declined to 270,750. Jobless claims averaging less than 300,000 a week have corresponded with net monthly job gains of roughly 200,000. (AP)

U.S. Construction Spending Rises to Highest Since 2008. U.S. construction spending climbed in August to the highest level since 2008, boosted by a surge in outlays for residential projects and giving a sign the housing market was helping the overall economy. Construction spending increased 0.7% to $1.09 trillion, the highest level since May 2008, the Commerce Department said on Thursday. Economists polled had forecast a 0.5% gain. Construction spending has increased for nine straight months. Construction spending in August was buoyed by a 1.3% jump in private residential construction. (Reuters)

Europe

Europe’s Factories Cut Prices as Oil Slump Seeps through Economy. Euro-area manufacturers have started to pass on the latest oil-price slump to their customers. Factory-gate prices fell in September for the first time in six months as input costs declined at the fastest pace since January, London-based Markit Economics said in a report on Thursday. A Purchasing Managers’ Index for the manufacturing industry fell to 52 last month from 52.3. Companies are stepping up output in response to a rising inflow of new orders, according to the report. (Bloomberg)

German Factories Post Solid Activity Growth in September - PMI. Spurred by strong output from consumer goods producers and rising new orders, German manufacturers Germany’s economy on a solid growth track in the third quarter, a survey showed on Thursday. Markit's PMI for manufacturing, which makes up about one fifth of the German economy, fell to 52.3 in September from 53.3 in August. That was slightly below a consensus forecast of 52.5. New business continued to rise at a solid rate with the respective sub-index coming in at its second-strongest level in 17 months. The ongoing drop in input prices was the strongest since February and resulted in the first reduction in selling prices for seven months. (Reuters)

UK Factory PMI Eases, Jobs Fall for First Time Since 2013. British factory activity cooled further in September and manufacturers trimmed staff levels for the first time in more than two years, a survey showed on Thursday. The Markit/CIPS UK Manufacturing PMI slipped to 51.5 from 51.6 in August. September's PMI was only just above a two-year low hit in June. Economists polled had expected a slightly worse reading of 51.3. Official data on Wednesday showed manufacturing output shrank 0.5% from April through June. The survey's jobs index slipped below the 50 mark for the first time since April 2013, adding to signs that a phase of strong employment growth in Britain has flattened out. (Reuters)

UK Productivity Rises at Fastest Rate in Four Years. Productivity across the UK economy rose at its fastest rate in four years in the second quarter according to the Office for National Statistics (ONS). Productivity is a key indicator for the Bank of England as it considers whether to put up interest rates. Output per hour rose 0.9% between April and June, the biggest QoQ rise in four years. The ONS also said unit labour costs - the cost to companies of employing staff - rose 2.2% in the second quarter versus the same time last year - the fastest rate since the fourth quarter of 2012. (BBC)

Market May be Underpricing Risks of Falling Liquidity – BOE. Financial markets may not be alert to the potential damage caused by drops in liquidity, according to stability officials at the Bank of England. Concern about liquidity is intensifying since a global bond rout in the second quarter erased more than a half a trillion dollars in the value of sovereign debt. The world’s biggest banks are scaling back their bond-trading activities to comply with higher capital requirements imposed in the wake of the financial crisis. (Bloomberg)

Currencies

Dollar Drifts Down Before Key U.S. Jobs Report. The dollar drifted lower on Thursday as traders puzzled over data sending contrary messages about the U.S. economy and prospects for a 2015 interest rate hike by the Federal Reserve. Separate reports showed growth at U.S. factories slowed in September while weekly jobless claims pointed to a tightening labor market. The dollar index dipped after the ISM report and was last off 0.21%. The euro was up 0.5% against the dollar at $1.1190, while the dollar was nearly flat against the yen at 119.85. The dollar was also 0.40% higher against the Swiss franc at 0.9777. (Reuters)

Commodities

Oil Down as U.S. Storm Worries Fade. Oil prices fell more than 1% on Thursday as the government's storm monitor altered forecasts for the path of the latest U.S. hurricane, snuffing out an early rally that was prompted by fears of storm damage to U.S. East Coast oil installations. Brent settled down $0.68, or 1.4%, at $47.69 a barrel, after hitting a one-week high at $49.84. The West Texas Intermediate (WTI) benchmark for U.S. crude finished down $0.35, or 0.8%, at $44.74. Brent and WTI have largely traded in a $5 range the past month despite price swings of up to 5% a day at times. (Reuters)

Palladium Hits Near 3-Month High on Strong Auto Sales; Gold Flat. Palladium rose to its highest level in nearly three months on Thursday on reports of strong car sales from major automakers. Gold prices were little changed ahead of the U.S. nonfarm payrolls data for September due out on Friday. Spot palladium was up 3.3% at $672 an ounce as of 1921 GMT, after rising as high as $679.50, its highest level since July 7. Spot gold was down less than 0.1% at $1,114.06 an ounce, after dropping to $1,110.75, its lowest level since September 16. U.S. December gold futures settled down $1.50 an ounce at $1,113.70. Silver was down 0.1% at $14.50 an ounce. (Reuters)