What's Important in the Financial World (3/1/2012) Facebook Ads, European PMI

There may be a ray of light out of China showing that parts of the global economy are solid. The PMI of the People’s Republic rose to 51 in February, a sign that manufacturing grew very, very modestly. The data showed that export activity was fairly good. That could mean inventories among China’s trade partners are low, but it also could mean a pick-up in business and consumer demand. That is not likely to have occurred in recession-plagued Europe. However, U.S. GDP has grown faster than expected and was up 3% in the past quarter. That improvement has prompted many economists to revise their 2012 U.S. growth forecasts higher. China’s PMI over the next several months could be one of a number of indications of whether those forecasts are correct.

European PMI

The PMI of many nations in Europe improved last month, according to research firm Markit. The regionwide number was 49, which is not terribly bad as many of the nations in the eurozone are in periods of deep recession. But the top-line figure masked deep trouble within some countries. The number for Greece was a remarkably low 37.7, a sign that its economy could continue to shrink for years. In Spain, the figure was only 45, another sign that a bailout of the country has become more likely. One of the pockets of strength was in the region’s largest economy — Germany — where the PMI was 50.2. France, the second largest economy in the eurozone, has a PMI of 50.

Gas Prices Rise

Gasoline price increases have shown no sign of letting up. AAA reported the average cost of a gallon of regular nationwide was $3.73 yesterday. That number was $3.44 a month ago. The data are much, much worse in California, the country’s most populous state. There, the average price of regular is $4.33. The average price for a gallon of premium is $4.53. This adds to the burdens that have already done severe damage to the California economy. Its unemployment rate is one of the highest in the nation, and in some interior cities the numbers are in double digits. And home prices in some of its cities have dropped by the most among the largest metro areas in the U.S.

Facebook Ads

Facebook has decided that its advertising sales are weak enough that it could affect the price of its IPO. The social network controls close to a third of the display advertising inventory in the U.S. However, what advertisers are willing to pay for that inventory is low. Facebook does not produce content so that marketers can target messages based on online reader activity. Facebook is also very late into the market for mobile ads. The social network has introduced new tools to make it a more attractive venue for marketers. Its “Premium on Facebook” program will allow advertisers to use video and other interactive messages. These can appear on the home pages of members. As many media have pointed out, this new set of products could alienate some Facebook users who expect their pages to be free of intrusive advertising messages.

Douglas A. McIntyre