3 Numbers to Watch: Europe PMI & inflation, US manufacturing ISM
This week will be dominated by the US employment report on Friday and the European Central Bank’s meeting on Thursday. As the ECB is not expected to do anything, the European numbers should be interpreted in terms of their effect on flows and especially the bond markets. The key will be estimating how the US numbers will impact the Federal Reserve’s planned asset purchase tapering, of which today’s manufacturing PMI is one to watch. China’s June manufacturing PMI was published earlier today, and after a weak 50.8 in May, it was expected to drop further to 50.1.
Eurozone June Final Markit Manufacturing PMI (07:58 GMT): Expectations are at 48.7. The Markit PMIs have been edging up during the past couple of months, albeit from quite low levels and still below the critical 50 separating boom and bust. Of the national-level data, worth watching will be Spain 07:13, Italy 07:43, France 07:48 and Germany 07:53. The two big problems in Europe are Spain and Italy. Especially Spain’s economic hardships are almost unbearable, so the last month’s big rise in the PMI has raised hopes that the country would be coming out of recession. The Markit press releases will be posted here. The service PMIs will be released on Wednesday.
EZ June Flash Consumer Prices (09:00 GMT): The harmonised index of consumer prices is expected to have increased to 1.4 percent in June. This is slightly higher than the 1.2 percent in May, but still well below the ECB’s target of two percent. There are no signs of inflation creeping up – as at least modest growth and lower unemployment would be needed for that. Thus the May uptick could be considered to be a fluke and better ignored. Only a severe drop in PMI expectations and inflation approaching deflationary levels would push the ECB to action, so market reaction should be muted in any outcome. We also get the Eurozone’s unemployment rate for May, which is expected to have risen to a new record of 12.3 percent. This would be the 25th month of continuously higher monthly unemployment rates. Unfortunately, employment is not high on the list of the variables that the ECB is reacting to.
US June Manufacturing ISM (14:00 GMT): The index is expected to print a number very near the 50-level or perhaps slightly above, after posting a below-50 reading of 49 in May. The regional surveys for June have been somewhat positive, and overall this would suggest that the US economy is about to pick up after its recent slowdown. The June Markit PMI will be published one hour before the ISM report, which could change the last-minute expectations for the ISM’s number as well. The non-manufacturing ISM will be published on Wednesday.
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