Article / 23 June 2016 at 5:00 GMT

3 Numbers: Slightly firmer reading expected for US manufacturing

editor/analyst /
United States
  • Eurozone PMIs for manufacturing and services expected to remain steady in June
  • Slow US growth but no recession likely to be confirmed in Chicago Fed release
  • June US Manufacturing PMI on track to inch higher, but sluggish output endures

By James Picerno

Thursday’s a busy day for economic news, but all the releases will be background noise until the results of today’s UK Brexit vote are posted on Friday. Meanwhile, keep an eye on today's flash data report for Eurozone manufacturing and services PMIs in June. Later, several US numbers are scheduled, including the Chicago Fed National Activity Index for May and the first look at the Manufacturing PMI for June.

 Inching higher ... today's US Manufacturing PMI is set to show sluggish output. Photo: iStock

Eurozone: Manufacturing & Services PMIs (0800 GMT) Euro area manufacturing output has been subdued this year. The services sector, by comparison, is stronger and showing signs of accelerating, based on May's survey data from Markit Economics.

More of the same is expected in today’s flash data for June, according to’s consensus forecast. Economists think that the Manufacturing PMI will tick lower, but only slightly by dipping to 51.3 from 51.5 in the previous month. The Services PMI is on track to hold steady at 53.1 this month.

The elephant in the room, of course, is Brexit. If the UK leaves the European Union, most analysts anticipate some degree of fallout on both sides of the English Channel from an economic perspective. There’s also the risk of political turbulence. Finland’s Finance Minister last week went so far as to say that a British exit from the EU would be Europe’s “Lehman Brothers moment”.

Exaggeration? Maybe, but “what we want to avoid is that markets start speculating about a domino effect,” a senior EU official told The Wall Street Journal this week. “We want to make sure Poland, the Czech Republic and others are there to stay.”  

No one’s really sure if that's possible, or how a Brexit would play out, if it should come to that. Meanwhile, today’s numbers have a narrower and arguably marginal agenda by outlining how the Eurozone’s sluggish recovery is faring in pre-Brexit June.

The question hanging over the data is whether the PMI numbers are relevant for what comes next? The answer, which may evolve over several months if not years, depending on the outcome, starts with tomorrow’s headlines.

US: Chicago Fed National Activity Index (1230 GMT) Will slow growth deteriorate into a new recession in the US? Unlikely, or so my projection assumes for today’s May report on the three-month moving average of the Chicago Fed National Activity Index (CFNAI-MA3).

There’s no question that output has been sluggish in recent months. CFNAI-MA3 dipped to negative 0.22 in April, the lowest reading so far this year. But that’s still comfortably above the negative 0.70 tipping point that, according to the Chicago Fed, signals an economic contraction.

Nonetheless, the crowd is anxious. Between mixed economic reports in recent months and today’s Brexit vote, there’s a palpable tension in the air as the world awaits the outcome of the UK referendum.

Today’s update on CFNAI-MA3, however, is unlikely to provide a smoking gun for the bears. I’m expecting a slightly firmer reading for May, as I outlined here. My econometric modelling sees CFNAI-MA3 ticking up to a negative 0.15. That still amounts to below-trend growth, as per any reading below zero. But if the forecast holds, or something close to it, today’s release will confirm that the US economy was still expanding through last month.

US: Manufacturing PMI (1345 GMT) While the Chicago Fed release at 1230 GMT will provide a degree of closure for the economic profile in May, today’s PMI report offers an early clue on macro conditions in June.

It has been clear for some time that US manufacturing activity is, at best, weak. Today’s flash PMI data isn’t expected to change that view, although economists are expecting a fractional rise.’s consensus forecast calls for a small bounce to 51.0 for June, up slightly from 50.5 in the previous month. That’s still too close to the neutral 50 mark to inspire confidence that a manufacturing rebound is on the near-term horizon. But a bit of good news for this battered sector will keep hope alive that maybe, just maybe, the worst has passed.

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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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