3 Numbers: Eurozone Q3 GDP To Stay On Track
James Picerno | Dec 06, 2016 01:27AM ET
- German factory orders should show a welcome rebound in today's October update
- Economists look for 0.3% growth in today’s revised Eurozone Q3 GDP report
- Analysts see a strong rebound for US factory orders in October
- Matteo Renzi's departure throws up another challenge for the EU
Eurozone data is on display for Tuesday, starting with German factory orders for October. We’ll also see the second revision for third quarter Eurozone GDP, followed by US factory orders for October.
Germany: Factory Orders (0700 GMT): It’s too soon to tell what economic impact, if any, we’ll see from Italy’s No vote on constitutional reform that boosts the political prospects for the country’s anti-establishment populist parties in the next election.
For now, the result throws Europe’s third largest economy into political limbo as Prime Minister Matteo Renzi prepares to step down after losing the referendum. Although a euro exit for the country is unlikely, Renzi’s defeat is considered another challenge for the European Union.
“Markets now are likely getting prepared for a long period of gridlock, which is not unusual in Italy,” noted the chief euro area economist at Pantheon Macroeconomics in London.
Meantime, how is Europe’s strongest economy holding up? Today’s October numbers on factory orders offer an update. Economists are looking for a moderate rebound in the monthly comparison after orders slumped 0.6% in September – the first decline in three months. Econoday.com’s consensus forecast sees a bounce in today’s report: Orders are expected to rise 0.8% in October.
November’s survey data suggests that good news will continue as Q4 releases arrive in the weeks ahead.
“Although the PMI dipped slightly from October’s 33-month high, the average reading over the fourth quarter so far was in fact the best since early-2014, thereby suggesting that the sector should have a positive contribution to GDP growth at the end of the year,” an economist at IHS Markit said last week.
Today’s hard data on factory orders for October aren’t expected to give the crowd a reason to argue otherwise.
Eurozone: Q3 GDP (1000 GMT): It’s unclear if macro risks for the euro area are destined to rise because of Italy’s rejection of constitutional change in Sunday’s referendum.
Get The News You Want
Based on current numbers and projections that pre-date the vote, however, GDP momentum is still on track to tick higher for the Eurozone in the fourth quarter.
Meantime, today’s second Q3 revision will likely hold at a 0.3% quarterly rate, matching the preliminary estimate for the quarter, according to Econoday.com’s consensus forecast.
Looking ahead to Q4’s data, the Eurozone Composite PMI for November points to firmer growth. Although the index was revised down slightly for November, the 54.3 reading for last month – an 11-month high - remains well above the neutral 50.0 mark.
“The Eurozone PMI indicated faster economic growth in November,” said the chief economist at IHS Markit yesterday. “The improvement is enough to signal an acceleration of GDP growth to 0.4% in the fourth quarter.”
The question, of course, is whether a downside attitude adjustment is bubbling down the road because of Italy’s new political turmoil?
Maybe, but for now the broad trend for the Eurozone still looks upbeat for the final quarter of 2016.
US: Factory Orders (1500 GMT): Today’s hard-data update on factory orders for October will provide more context for deciding if the manufacturing sector is truly on the mend.
Survey data certainly looks encouraging. Five regional manufacturing benchmarks published by Federal Reserve banks turned positive – simultaneously – last month for first time in two years.
Meanwhile, the ISM Manufacturing Index for the US ticked up for the third month in a row in November and expanded the margin of comfort over the neutral 50 mark.
“Manufacturing is starting to build up and have a bit of a crescendo here,” a spokesman for ISM said last week. “Things are looking pretty good.”
Today’s report on factory orders for October are expected to look pretty good too.
Econoday.com’s consensus forecast calls for a strong 2.7% increase for the monthly change. If accurate, the advance will mark the biggest increase in more than a year and reaffirm that manufacturing’s positive momentum has room to run.
Chris Williamson at IHS Markit said as much last week, observing that “production and order books are growing at impressive rates, fuelled predominantly by rising domestic demand for goods from both consumers and businesses.”
Given the upbeat tailwind, it would be surprising if orders don’t show some bounce in today’s update.
Disclosure: Originally published at Saxo Bank TradingFloor.com
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.