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Article / 23 May 2016 at 5:05 GMT

3 Numbers: US Manufacturing PMI to hold just above neutral

editor/analyst /
United States
  • Eurozone PMI data to point to modest growth 
  • Will Eurozone consumer confidence tick higher for second month?
  • US Manufacturing PMI to inch higher, but stay close to stagnation level

By James Picerno

The week kicks off with preliminary estimates of sentiment data for May via Markit’s purchasing managers’ indices. Fresh numbers for Monday include PMI figures for the Eurozone manufacturing and services and manufacturing data for the US. We’ll also see the European Commission’s initial estimate of consumer sentiment in May for the euro area. 

 The consensus forecast calls for a rise in the US Manufacturing PMI to a slightly improved 51.0 for the month of May, up from 50.8 in April. Photo: iStock

Eurozone: Manufacturing and Services PMIs (0800 GMT)
Sentiment data for manufacturing has been firming in recent months while the comparable numbers for services remains steady, albeit modestly below levels in 2015. Taken together, these results suggest that Europe will hold on to a growth bias in the second quarter. The trend may tick lower relative to the first quarter's relatively robust 0.5% rise in GDP (quarter over quarter rate). But for the moment, the economic outlook for Europe in the second quarter remains in the plus column.

Yet there’s also hints that the trend is slowing… again.’s weekly update of Eurozone Q2 GDP slipped for the third time on Friday, dipping to just 0.22%. That’s less than half the rate in Q1, according to official Eurostat data.

The Euro-Coin Indicator — a monthly proxy for quarterly changes in euro area GDP — is also pointing to slower growth in Q2. The estimated three-month increase through April eased to a 13-month low of just 0.28%.

Today’s flash data on PMIs for May will provide fresh guidance on Europe’s macro trend at the mid-point for the second quarter. Considering that’s Q2 GDP estimates have been falling lately implies that today’s PMI data isn’t going to make much progress compared with April readings.

US: Manufacturing PMI (1345 GMT) Manufacturing activity in the US expanded in April, but just barely, according to two national sentiment benchmarks. In a rare case of unity, both the ISM Manufacturing Index and Markit’s PMI settled at 50.8 in April — just above the neutral 50 mark that separates growth from contraction.

Two early clues for May, via last week’s releases from regional Fed banks, point to weakness for this month. The New York Fed’s Empire State index fell sharply for the May reading, sliding to negative 9 — a dramatic reversal after April’s positive 9 value. The Philly Fed’s regional benchmark for manufacturing in May was also in negative territory.

“My view [is] that the manufacturing sector is largely dragging along the bottom,” the chief economist at Amherst Pierpont Securities said last week.

Will today’s flash report for national manufacturing activity offer a brighter story? Yes, although only slightly so.’s consensus forecast calls for a rise in the Manufacturing PMI to 51.0 for May vs. 50.8 in the previous month. Better, but a reminder that the manufacturing trend remains shaky at best.

Eurozone: Consumer Confidence Indicator (1400 GMT) Consumer sentiment across the euro area is also in focus today via the European Commission’s monthly release. The data has been hinting at a mild recovery after the mood took a hit in this year’s first quarter. It’ll be useful to learn if today’s flash data for May offers another reason to think positively on the prospects for a firmer trend in the second quarter and beyond.

The April report offered a slight reprieve after the Q1 setback. For the first time in four months, the EC’s Consumer Confidence Indicator ticked higher. The -9.3 reading for last month is still close to the lowest level in more than a year, but another rise in May would ease concern that the mood in the consumer sector is set to deteriorate further in 2016.

Meantime, the Eurozone economy is “holding up OK,” Berenberg chief economist told Bloomberg on Friday. Nonetheless, structural reform is needed in parts of the developed world, including France. “If we have more structural reforms … then we’d have more trend growth [and] everybody’s job would be easier, including the job of the European Central Bank,” opined Holger Schmieding.

On that note, short of a vote in the UK next month to quit the European Union, he expects that the ECB’s done with easing. As a preliminary reality check on that forecast, today’s preliminary data on the consumer mood in Europe may be revealing.


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 – Edited by Susan McDonald

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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