Ole Hansen
Saxo Bank’s head of commodity strategy Ole Hansen considers the implications of pledges by Saudi Arabia and Russia to raise oil production despite the likes of Iran and Venezuela not backing the move.
Article / 25 July 2016 at 5:02 GMT

3 Numbers: Brazil’s consumer sentiment offers hopeful signs

editor/analyst /
United States
  • Germany’s Ifo survey data looks set to ease in today’s July report
  • Modest gains for Brazil’s consumer sentiment may be a sign the worst has passed
  • Less contraction is expected in today's Dallas Fed Manufacturing Index

By James Picerno

Germany’s economy is in focus today with the July release of the Ifo survey numbers. We’ll also see new reports for this month’s readings on consumer sentiment in Brazil and the Dallas Fed manufacturing index in the US.

Happy days ... Brazil's consumer sentiment is expected to show a
fragile recovery is in play. Photo: iStock

Germany: Ifo Survey (0800 GMT) Last week’s ZEW survey of Germany’s financial community raised fresh warnings about the outlook for the economy. The expectations index was particularly hard hit, stumbling in July to its lowest reading since late 2012. ZEW-President Achim Wambach blamed the weakness on last month's Brexit vote and related concerns about export prospects for Europe's biggest economy.

It doesn't help to see Now-casting.coms’s weekly projections for Eurozone GDP growth dipping a bit deeper into subdued territory in Friday's update. 

But another survey published at last week’s close paints a brighter profile. German economic growth picked up speed at the start of the third quarter, Markit Economics advised. The flash estimate for Germany's PMI Composite Index jumped to a seven-month high of 54.4, well above the neutral 50 mark that separates growth from contraction.

“Strong tailwinds from a healthy labour market and rising demand are propelling the economy forward, while businesses so far seem to be unaffected by uncertainties around the UK’s decision to leave the EU,” a Markit economist noted.

Today’s Ifo data may help clear up the mixed messages. If Germany’s macro trend is destined to sag in the second half of 2016, the weakness may show up in the Ifo’s polling of German businesses.

Brazil: FGV Consumer Confidence Index (1100 GMT) Brazil has had a rough ride over the past year. The combination of an economic recession with political turmoil related to the impeachment of President Dilma Rousseff has opened up a dark chapter for the country. But recent numbers suggest that the worst may be over from a macro perspective.

One encouraging sign, albeit in relative terms, is last week’s International Monetary Fund decision to ease its negative forecast for GDP growth in 2016. The outlook is still a recession call via a projected 3.3% decline in output this year, but that’s moderately better than the 3.8% slide in the IMF’s April forecast. For 2017, the IMF expects that GDP is on track to post a modest rise of 0.5%, which would mark the first calendar-year increase since 2014, based on World Bank data.

“Consumer and business confidence appears to have bottomed out in Brazil, and the GDP contraction in the first quarter was milder than anticipated,” the IMF advised. “Consequently, the 2016 recession is now projected to be slightly less severe, with a return to positive growth in 2017.”

Today’s update on consumer confidence offers a reality check for the IMF’s comparatively optimistic outlook for next year. Note that Brazil’s stock market is tentatively on board with raising expectations. The Ibovespa index has been winding higher this year, closing on Friday at its highest level since early 2015.

Sentiment in the country’s battered consumer sector is starting to revive too. The FGV Consumer Confidence Index (CCI) ticked up in June for the second straight month, touching a seven-month high. “The increase was entirely determined by improved expectations, as the indicators that measure the perception of the current situation were stable,” advised FGV/IBRE, the group that publishes the numbers.

There’s still a long way to go before Brazil’s economy even begins to return to “normal” conditions. But for the moment, the outline of a fragile recovery appears to be in the works. Another increase in today’s CCI numbers for July will help strengthen the case for thinking that a delicate rebound remains intact.

US: Dallas Fed Manufacturing Index (1430 GMT) Another case of mixed messages is currently clouding the outlook for the US manufacturing sector. Two regional indices published by Federal Reserve banks last week hint at softer conditions in July.

But Markit’s preliminary estimate for this month’s read on the US Manufacturing PMI tells a different story. The index perked up to 52.9 for the flash July report – a modest reading but the highest in 12 months.

“July saw manufacturers battle against a strong dollar, the ongoing energy sector downturn and political uncertainty ahead of the presidential election, yet still achieved the best growth seen since last year,” said Markit’s chief economist last week. "It remains too early to say if this is the start of a stronger upturn, but this is a welcome and encouraging sign of revival after the second quarter, in which the PMI signalled the sector’s worst performance for over six years."

For another data point for evaluating July, keep your eye on today’s regional report on manufacturing activity in July from the Dallas Fed. Note that comparable updates last week from the New York and Philadelphia banks revealed a reversal of fortunes. After posting moderately firmer numbers in June, both benchmarks slumped in July.

In short, it’s debatable if the US manufacturing sector is genuinely on the mend, as the PMI figures suggest. For additional context, the Dallas Fed report may provide some clarity. Analysts are looking for a lesser rate of decline.’s consensus forecast sees the headline index rising to a negative 12 reading for July, up from negative 18.3 in the previous month. That’s an improvement in relative terms, but it’s unlikely that today’s release will provide optimists with clear-cut evidence that manufacturing is on the mend.

– Edited by Gayle Bryant

James Picerno is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail