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Article / 01 July 2015 at 5:06 GMT

3 Numbers: Spain powers on, US jobs bonanza, US manufacturing growth

editor/analyst /
United States
  • Spain’s June manufacturing PMI on track to post another month of growth
  • ADP’s estimate of US private payrolls for June likely to post 200,000-plus increase
  • The US June ISM Manufacturing Index likely to show stabilisation and growth

By James Picerno

Wednesday’s another busy day of economic releases, although everyone’s attention will remain firmly focused on rapidly evolving story about Greece and its fiscal straightjacket. In any case, another round of upbeat news from the other side of the Eurozone is expected in today’s first look at Spain’s manufacturing survey numbers for June. Later, two US releases are on tap: the June report on private payrolls via ADP’s estimate, followed by the ISM Manufacturing Index for last month.

Spain: Manufacturing PMI (07:15 GMT) Some analysts have painted Spain and Greece with the same brush over the past year thanks to restive political movements. But economically speaking, no one should confuse the state of these two nations. One is in turmoil; the other continues to post upbeat numbers as a recovery gains traction. The question is whether the travails of one threaten the other, and perhaps the whole of the Eurozone?

The future, in short, is uncertain, although mostly for political reasons. Meantime, today’s first look at Spain’s June survey data for the manufacturing sector will likely reflect a solid expansion at the midway point for the year. The news will come as no surprise after months of upbeat news for the Spanish economy. The manufacturing sector is clearly participating in the rebound. Markit’s survey data for May reflected “accelerated growth of output, new orders and employment,” with the headline index rising to 55.8, an eight-year high.

 No, this is not Greece: Spain continues to show robust recovery. Photo: iStock

“The latest PMI data show that the Spanish manufacturing sector is not only sustaining recovery during Q2, but growth seems to be accelerating,” noted the Markit economist who authored the report.

A bit of a pullback after the previous peak wouldn’t be surprising. The bigger question is how or if the Greek crisis affects the recovery in Spain – and the Eurozone generally – in the months ahead? No one really knows, but this much is clear: Europe’s fourth-largest economy will enter the macro twilight zone with a robust run of positive momentum.

US: ADP Employment Report (12:15 GMT) The crisis in Greece doesn’t pose much of a threat to the US economy, although the shock waves could reverberate throughout the global economy. The psychological blow-back could turn out to be dramatic, depending on how the end game plays out. In that sense, anything’s possible. But for the moment, the US data is showing signs of a modest acceleration after rough patch in early 2015.

The housing market, for instance, is reflecting renewed strength lately while consumer spending revived sharply in May. Payrolls are still the critical factor, but other than a weak gain in March the growth rate has remained healthy this year. In May, US companies added a solid 262,000 jobs, the strongest rise since last December.

Today’s monthly report from ADP will, as usual, serve as a preview for Thursday’s official update from the US Labor Department. Economists are generally optimistic on both counts, based on’s consensus forecast.

The crowd’s looking for a 220,000 rise in private payrolls for June via ADP’s estimate and a 225,000 gain in the comparable number due tomorrow via the government’s data, which will be released a day earlier due to the July 4 holiday weekend in the US that will shut markets and government offices. If the forecasts are right, the case will strengthen for seeing Greece as a minor issue for the US economy.

That’s not to say that there’s nothing to worry about when it comes to foreign challenges to the US economy. On that score, the recent deceleration in China’s growth is a bigger issue. Greece, by comparison, is at worst a bump in the road outside of Europe.

US: ISM Manufacturing Index (14:00 GMT) Manufacturing has been one of the weaker corners of the US economy this year, but there are signs that this cyclically sensitive sector is stabilising if not rebounding.

But if the sector’s reviving, it looks like a sluggish recovery so far. Markit’s flash estimate of its June purchasing managers’ index (PMI) for manufacturing weakened a bit to 53.4. That’s still well above the neutral 50.0 mark that separates growth from contraction, but the latest slide leaves the PMI at its lowest level since October 2013.

On the plus side, the employment component for this month’s PMI release reflects a robust gain, signalling one of the strongest gains since the recession, Markit’s chief economist noted last week. But he reminded that changes payrolls in manufacturing tend to follow the trend in order books. “Firms are therefore likely to start cutting back on hiring unless demand revives in coming months.”

With that in mind, it’ll be informative to see how the employment and new orders components fare in today’s revised PMI release (13:45 GMT) and the first look at the ISM manufacturing numbers that follow. Overall, the two reports are expected to tick higher for June against the previous month in terms of the headline data.

The revised PMI number is on track to rise slightly, to 53.7 in today’s release against 53.4 in the flash estimate, according to’s consensus view. A similarly modest improvement is expected for the top line ISM benchmark for June: 53.2 against 52.8 in the previous month.

In short, manufacturing will expand at a moderate rate. The pace has slowed relative to last year, but the crowd’s assuming that this slice of the US economy will keep its head above water for the foreseeable future.

Source: Markit Economics, ISM. Create your own charts with SaxoTrader. Click here to learn more 

-- Edited by Adam Courtenay

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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