3 Numbers: Slight retreat for EU composite PMI, US mortgages, US PMI
- Today’s Eurozone PMI data offers an early look at the September macro profile
- US mortgage applications to be closely read after recent stumble in housing sales
- US manufacturing PMI report likely to tick higher but Fed bank data raises doubt
the outlook for housing activity remains bright. Photo: iStock
Eurozone: Composite PMI (0800 GMT) An early big-picture look at Europe’s macro trend in September arrives with today’s flash data on sentiment for the manufacturing and services sector.
In fact, the crowd’s looking for a slight retreat, although Econoday.com’s consensus forecast for a dip in the composite benchmark to 53.9 for this month from 54.1 in August is hardly a smoking gun.
Meanwhile, Berenberg’s September 18 outlook for the Eurozone noted that weakness in emerging market economies is a risk factor, although the boost from cheap energy and a weaker euro offers a tailwind that will offset most of the external pressures. As a result, the bank expects only a fractional downtick in third-quarter GDP growth for the euro area: 0.3% vs. the previously reported 0.4% for Q2 (quarter-over-quarter rate). Now-casting.com’s current estimate for Q3 expects something closer to 0.4%.
A major downside surprise in today’s PMI data would, of course, imply that forecasters have been too optimistic. In turn, disappointing news would boost the odds that the European Central Bank will enhance its current monetary stimulus program to juice inflation and growth.
No, at least not yet. Despite the latest monthly decrease, sales for last month are ahead by a solid 6.2% vs. the year-earlier level. Although the annual pace ticked lower in the latest update, it’s not obvious that this is more than short-term noise. “Even with the decline, I believe we are comfortably set for the best home-sales year in eight years,” said the chief economist at the National Association of Realtors, the group that publishes these numbers.
But if that rosy outlook is overly optimistic, we may see the evidence in today’s weekly update on mortgage applications. The appetite for real estate transactions has been slipping lately, according to data from the Mortgage Bankers' Association. For the second week in a row, new applications for mortgages fell sharply. As a result, the trend for the last three months has turned slightly negative (dotted red line in chart below).
Nonetheless, with US job growth still posting a moderately positive trend, the outlook for housing activity remains bright. Another round of weakness in today’s weekly release, however, will strengthen the view that housing’s near-term growth prospects will be modest at best.
Is the negative trend via the Fed figures a clue for expecting trouble in today’s flash September estimate for Markit’s purchasing managers’ index for manufacturing? No, or so Econoday.com’s consensus forecast suggests. In fact, the crowd’s looking for an incremental gain to 53.1 for this month’s preliminary reading, up from 53.0 in August.
If the projection holds, today’s update will show that manufacturing is still growing at a moderate rate, albeit at a relatively subdued pace compared with recent history. The key headwinds are a stronger dollar, a sharp reduction in demand from energy-related business, and weaker growth abroad.