composite pmi

Some good news for once, with the eurozone PMI ticking up in December. Inflation pressures continue to fade due to lower demand and moderating supply chain problems. For the ECB, the latter adds to doubts about yesterday’s hawkish tone The composite PMI improved from 47.8 to 48.8 in December. This still signals contraction, but as the quarter comes to a close, we can conclude that the contraction in the eurozone economy was likely mild. The easing of contraction was noted in both the manufacturing and services survey. For manufacturing, output fell less in part because the drop in new orders also eased a bit. Very importantly though, delivery times improved for the first time since the start of the Covid-19 pandemic. This indicates that supply chain problems are quickly fading at the moment due to a combination of low demand for inputs and improvements in production. For services, new business continued to contract at a similar pace to last month but recreation saw an uptick in activity again. For price growth, the easing of supply problems is adding to disinflationary pressures. Businesses reported a significant improvement in input cost inflation as they rose at the slowest pace since May 2021. Selling prices still increased at a fast pace, but the pace has been slowing. This is related to the declining need to price through higher costs to consumers and because of discount sales related to lower demand, according to the survey. For the ECB, this must be quite a difficult survey to interpret. Yesterday, the central bank revealed a particularly hawkish take on the economic situation and ECB President Christine Lagarde noted that a mild recession is unlikely to be enough to tame inflation. While the downturn seems to be easing according to the survey, we also see that inflationary pressures continue to cool. For the doves on the governing council, the latter will likely fuel concern that the ECB could end up doing too much. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Eurozone PMI drops again in June, confirming weakness in economy The PMI dropped sharply in June, giving a broad sense of weakening economic activity towards the end of the quarter. Another quarter of negative GDP growth is not unimaginable, although the current slump clearly remains mild enough for the European Central Bank not to change course on rate hikes.   The composite PMI dropped from 52.8 to 50.3, following a decline in May as well. Taken at face value, the survey indicates broad stagnation in the economy, which seems to be a fair assessment of current economic activity. While the survey indicates a worsening downturn in manufacturing as the output PMI for manufacturing dropped from 46.4 to 44.6, the services index continues to grow, albeit at a rapidly slowing pace (services PMI was down from 55.1 to 52.4). This suggests that the reopening boost to services activity is on its last legs at the moment, adding to the sluggish economic environment we’re currently in. Overall, it looks like the eurozone economy has entered a sluggish period where economic growth is hovering around 0%. After the weak May PMI reading and soft production and sales data for April, today's PMI adds to evidence that the rebound from two small negative growth quarters is set to disappoint. In fact, another quarter of negative growth is becoming more likely. The upside to the weak economic picture is that inflation pressures continue to fade. The PMI suggests another month of easing price pressures both for manufacturing and services, although they remain more problematic in services. Nevertheless, the direction is positive as average prices charged for goods and services rose at the slowest pace in more than two years. The sluggish economic picture combined with continued improving inflation would appear to be dovish for the ECB. However, none of this will provide a catalyst for the bank to change direction on rate hikes. Policymakers seem to prefer too much, rather than too little tightening right now, which sets the stage for another potential hike in September.

05:40BST Wednesday 23rd August 2023 Flash PMIs set to weaken further in August   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     The FTSE100 managed to finally break its worst run of losses since 2019 yesterday, posting its first daily gain since the 10th August. The gains were hard-won however with the index trying retreating from its daily highs and failing for the second day in a row to consolidate a move above 7,300. The rest of Europe managed to do slightly better, outperforming and closing higher for the 2nd day in a row, although still closing well off the highs of the day.       US markets on the other hand after starting strongly slipped back after European markets had closed, sliding back on comments from Richmond Fed President Thomas Barkin who said the Fed needed to be open to the prospect the US economy might re-accelerate which might mean the central bank might need to hike rates further and keep them higher for longer, pushing the US dollar to its highs for the day in the process. Despite the weaker finish for US markets, the resilience in Asia markets looks set to see European markets open slightly higher later this morning.  The last set of flash PMIs saw German manufacturing slide to its lowest levels since the Covid lockdowns at 38.8 in further signs that the engine of the German economy continues to stutter. Weak demand in its key export markets as well as domestically, along with higher energy prices weighing on economic activity.       The only bright spot was services which came in at 52.3, but even here economic activity was slower, and both sectors are expected to weaken further in August further complication the task of the ECB which is expected to signal a pause in its rate hiking cycle next month. Manufacturing activity is expected to soften further to 38.6, while services is expected to slip to 51.5. Economic activity in France was also disappointing in July, although the underperformance was more evenly distributed with both manufacturing and services both in contraction heading into Q3. Manufacturing slipped to 45.1 in July and services dropped to 47.1. With energy prices rising sharply over the last few weeks, it's hard to imagine a scenario that will see a significant improvement given the weakness seen in China and other overseas markets. Manufacturing is forecast to come in at 45, and services at 47.5.     While economic activity has been slowing in Europe, the UK has also seen similar slowdowns in both manufacturing and services, although the composite PMI is just about hanging on in expansion territory, unlike its peers across the Channel.     Construction has been a notable strong point, however the focus today is on manufacturing which slowed to 45.3 in July, while services slowed from 53.7 in June to 51.5 in July. The recent GDP numbers for June showed a strong performance, however Q3 is likely to be much more challenging, with higher oil and gas prices likely to filter through at the petrol pump. UK manufacturing is expected to slow to 45, and services to 51.     US manufacturing and services look set to be more resilient at 49 and 52 respectively.      EUR/USD – continues to find support just above the 1.0830 area. Below 1.0830 targets the 200-day SMA at 1.0790 and trend line support from the March lows at 1.0750. Still feels range bound with resistance at the 1.1030 area.     GBP/USD – failing at the 50-day SMA again and the 1.2800 area. We need to see a move through the 1.2800 area, to signal potential towards 1.3000. A break below 1.2600 targets 1.2400.           EUR/GBP – sinking towards support at the 0.8520/30 area. A move below 0.8500 could see 0.8480. Above the 100-day SMA at 0.8580 targets the 0.8720 area.     USD/JPY – failed to push above the 146.50 area yesterday,but while above the 144.80 area bias remains for a move towards 147.50. Below the 144.80 area, targets a move back to the 143.10 area.     FTSE100 is expected to open 10 points higher at 7,280     DAX is expected to open 42 points higher at 15,747     CAC40 is expected to open 14 points higher at 7,255

China: Momentum waned in October PMI data for October showed momentum in China's economy waned following recent improvements in hard activity data. The manufacturing PMI dropped back into contraction territory and the non-manufacturing PMI also fell.   Economic momentum slowed in October China's Official PMI numbers fell in October, which comes as a slight shock as recent activity data had been firming, and this suggests that the economy is still struggling despite the better-than-expected 3Q23 GDP figures reported recently.  China's composite PMI dropped from 52.0 to only 50.7 - consistent with only very slow overall economic growth. Within this total, the manufacturing PMI index fell into contraction territory (49.5, down from 50.2). There was a bigger fall in the non-manufacturing index to 50.6 from 51.7, but it managed to remain in expansion territory (just).    China's Official PMI indices (headlines)   Most industries saw growth slow By industry type, most manufacturing sectors experienced a slowdown in growth in October, though for companies that are heavy consumers of energy, activity actually declined slightly, perhaps affected by recent increases in the prices of crude energy.  Focusing on the manufacturing sector, the sub-components of the PMI index were quite mixed. Weak export orders and an inventory buildup, together with weak imports weighed on the headline index. Manufacturing production itself was not so bad, and employment also looked stronger, though quite a lot of the increase can be attributed to higher purchasing prices, which isn't necessarily a good thing.    October 2023 Manufacturing PMI - subcomponents   4Q23 GDP could slow If reflected in hard activity data, today's PMIs suggest that the momentum of China's economic growth ebbed at the beginning of the fourth quarter. Talk of recent support measures, including a wider central government deficit, will help offset any tendency for the economy to slow, though such measures will probably have more of an impact on growth at the beginning of 2024, given that we are already a third of the way through 4Q23.  Even so, today's data suggest that although it has weakened, economic growth is still ongoing. And if this initial set of data is representative of what will follow for the rest of the quarter, it should still be enough for China to hit its 5% GDP target for 2023 though on slower incremental growth in the fourth quarter of 2023. That said, 5% is a low hurdle, and reaching it doesn't mean that all of China's growth worries are over.

EUR: A new PMI test EUR/USD is around 1.0% cheaper compared to its short-term financial fair value at current levels. Normally, only deviations beyond the 1.5 standard deviation band (+/- 1.5% for EUR/USD) are followed by rapid convergences to the fair value. However, we believe the dollar rallied a bit too far yesterday, and there is some room for EUR/USD to tick back above 1.0900 into tomorrow’s European Central Bank announcement (here is our preview). At the same time, much of today’s price action in the pair will depend on PMIs. French and German figures are published ahead of the eurozone-wide numbers this morning. Expectations are modestly optimistic, with the eurozone composite PMIs seen rising from 47.6 to 48.0, led by marginal gains in both services and manufacturing. PMIs are often assessed in comparison with other countries. In the case of the eurozone, against the US and the UK. The consensus for UK PMIs is for a flat 52.1 (composite) reading. Barring a material surprise in the eurozone print, the lingering divergence between contractionary (EZ) and expansionary (UK) PMIs will keep EUR/GBP pressured today.

Eurozone PMIs show very tentative signs of bottoming out The eurozone economy continues to trend around 0% growth and there are no signs of any imminent recovery. Price pressures are still increasing for the service sector, which provides another argument for the ECB not to hike before June. How you read today’s PMI release for the eurozone reveals whether you’re an optimist or a pessimist. The increase from 47.6 to 47.9 in the composite PMI for January cautiously shows signs of bottoming out but also still indicates contraction. We also note that France and Germany saw declining PMIs, making the increase dependent on the smaller markets. Manufacturing price pressures remain moderate despite the Red Sea disruptions, but the service sector indicates another acceleration in input costs. To us, this shows that the eurozone economy remains in broad stagnation and that risks to inflation are not small enough to expect an ECB rate cut before June. The eurozone continues to be plagued by falling demand for goods and services, although new orders did fall at a slower pace than in recent months. Current production and activity were weaker than in recent months, though, suggesting that January started with contracting output still. The slowing pace of contracting orders does suggest that there is a bottoming out happening though. Whether this is enough to show positive GDP growth in the first quareter depends on February and March. In any case, GDP growth is so close to zero that we still qualify the current environment as broad stagnation anyway. The PMI continues to show some concern around inflation. Even though demand remains lacklustre, services cost pressures are on the rise again due to higher wage costs which are being transferred to consumers. Cost pressures on the goods side remain low despite Red Sea disruptions as energy prices trend lower and demand overall remains weak. This also means that goods inflation continues to trend down according to the survey. So, despite Red Sea problems prominently featuring in the news, inflation concerns currently stem more from services than goods, interestingly. For the ECB, enough worries about inflation not trending down to 2% quickly still remain. We think that makes a first cut before June unlikely.