A global bonds selloff has pushed yields up across the board towards post-Brexit highs while the anti-establishment wave sweeping the western world could force a 'No' vote on the Italian referendum in December.
Article / 23 August 2016 at 5:01 GMT

3 Numbers: Eurozone Composite PMI likely to tick lower

editor/analyst /
United States
  • Eurozone Composite PMI for August expected to edge lower
  • UK's CBI Industrial Trends Orders Survey to give more post-Brexit macro context
  • US new-home sales on track to fall after touching a post-recession high in June

By James Picerno

Tuesday’s a busy day for sentiment data, including the flash estimate of the Eurozone Composite PMI for August. We’ll also see new CBI survey numbers for UK manufacturing, offering another round of data for analysing the post-Brexit economic climate in Britain. For the US, the July report on new-home sales will offer new context for deciding if the recent rebound in home sales remains intact.

The Eurozone Composite PMI is projected to ease slightly this month. Photo: iStock

Eurozone: Composite PMI (0800 GMT)’s estimate for third-quarter GDP growth in the euro area ticked up last week. Although the quarter-on-quarter 0.23% estimate is still a weak pace, the slightly firmer reading was the first improvement since early July for the weekly Q3 nowcast.

Today’s flash PMI data for the Eurozone will provide more context for deciding if the macro outlook is stabilising after a challenging summer of data updates. GDP growth is still on track to tick lower in Q3, but perhaps the worst has passed and incoming data will lift the projections in the weeks ahead.

Note that the Bank of Italy’s Euro-Coin Indicator – a monthly estimate of GDP growth for the Eurozone – has been trending up modestly in recent months. The July data edged higher to a 0.31% quarterly gain, the highest since March.

Earlier this month, the July report for Markit’s Composite PMI pointed to GDP growth at 0.3%. Will today’s preliminary figures for August boost the forecast higher still? Probably not, according to the consensus forecast via 

This month’s Composite PMI is projected to ease slightly to 53.0 from 53.2 in July. In other words, the implied Eurozone GDP growth rate is still expected to hold at a quarterly 0.3% gain, unchanged from Q2’s increase.

UK: CBI Industrial Trends Orders (1000 GMT) Bloomberg this week reported that UK economic data is beating expectations lately. Recent warnings are overblown about elevated recession risk following the June vote to leave the European Union, according to some economists.

“If the hard data over coming months continue to surprise to the upside – and we will need a few months to know for sure – there is just a chance that the economy will hold up better than many economists expect,” advised an economist at Investec Securities in London.

A new clue arrives in today’s monthly update of the CBI Industrial Trends Survey numbers for August. The rear-view mirror, however, looks worrisome on this front. In July, the benchmark’s monthly order book balance dipped a bit deeper into negative territory, slipping to negative 4. “It's clear that a cloud of uncertainty is hovering over industry, post-Brexit,” CBI’s chief economist noted. “We see this in weak expectations for new orders, a sharp fall in optimism and a scaling back of investment plans.”

The Markit/CIPS UK Manufacturing PMI is also projecting rough waters ahead for the sector. The index fell into negative territory last month, dipping to the lowest level since early 2013. “The weakening order book trend and upswing in cost inflation point to further near-term pain for manufacturers,” a senior Markit economist explained earlier this month.

Short of a surprisingly strong reading in today’s CBI data, it’s reasonable to expect that the UK manufacturing sector isn’t going to provide the optimists with useful talking points any time soon.

US: New Home Sales (1400 GMT) The demand for home sales is on the rise this year. During the first half of 2016, transactions for new and existing homes has been trending higher. But the upswing is expected to take a breather in today’s update on newly built houses for July.’s consensus forecast sees new home sales falling to 580,000 units (seasonally adjusted annual rate) in the kickoff to the second half. For the moment, however, it’s reasonable to view a pullback as a pause that refreshes rather than the start of a new extended downturn in sales.

For starters, the projected slide to 580,000 still translates into a strong pace. Indeed, this consensus estimate represents the second-highest level since the last recession ended.

Note, too, that home builders as of last month remained optimistic about the near-term future for housing. “Builder confidence remains solid in the aftermath of weak GDP reports that were offset by positive job growth in July,” said the chief economist at the National Association of Home Builders. “Historically low mortgage rates, increased household formations and a firming labour market will help keep housing on an upward path during the rest of the year.”

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– 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.


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