3 Numbers: Slow Growth To Get Slower In US Manufacturing PMI
James Picerno | Oct 24, 2016 01:20AM ET
- Eurozone Composite PMI may tick higher after firmer third-quarter GDP forecast
- Another slow-growth reading expected for the US economy
- US Manufacturing PMI on track to dip to five-month low
Monday offers an array of new survey data for October, including the flash estimates for the Eurozone Composite PMI and the US Manufacturing PMI. We’ll also see an update on the broad macro trend for the US through September via the Chicago Fed National Activity Index.
The latest GDP projections suggest the Eurozone may be in for an autumn recovery. Photo: iStock
GDP projections from Now-casting.com hint at the possibility. Eurozone GDP for the third quarter is expected to tick up to a 0.4% quarterly rate, according to the consultancy’s revised estimate (as of October 21). That’s twice the rate compared with the estimate from early September. More importantly, a 0.4% increase represents a slight improvement over the 0.3% rise in the second quarter.
Forecasts should be taken with a grain of salt, of course, but the fact that Now-casting.com’s estimate is inching higher, when most of the third-quarter data points have already been published, is an encouraging sign for anticipating next month’s official GDP release.
Meantime, the Bank of Italy’s Euro-Coin Indicator, another GDP proxy, has also been trending higher lately. The September update reflected quarterly economic growth for the Eurozone at 0.34% – the highest since March and the fourth straight improvement for this monthly estimate.
Today’s flash data for the Eurozone PMI for October offers another spin on the outlook for GDP. According to IHS Markit, “each index point above or below 50 adds or subtracts 0.1% from the quarterly growth rate". Based on last week’s update from Now-casting.com, it’s reasonable to expect that today’s PMI will also reflect a slightly firmer estimate for Europe’s broad macro trend.
) The US economy is still on track to post moderately stronger growth in the third quarter, but the rebound is looking a bit weaker than previously estimated.
The Atlanta Fed’s GDPNow model is currently projecting a 2.0% rise in third-quarter GDP (seasonally adjusted annual rate). That’s a decent bounce from the 1.4% rise in the second quarter. But a month ago, the GDPNow Q3 estimate was closer to 3.0%.
Get The News You Want
By contrast, economists generally see a firmer rebound for the third quarter. The Wall Street’s survey data for October points to GDP growth at 2.6%, based on the average estimate, for the July-through-September quarter.
Today’s September update of the Chicago Fed National Activity Index (CFNAI) offers more data to consider in the dark art of analysing the macro trend. In recent months, this broad measure of economic activity has ticked higher after slumping to a four-year low in May, based on the three-month average for the index.
Growth has improved, but only modestly so. Nonetheless, recently released numbers on key indicators for September — payrolls, retail sales and industrial production — posted firmer monthly comparisons, which implies that today’s CFNAI reading for the three-month average will at least hold steady at August’s -0.07. A slightly negative value reflects below-trend growth. On the other hand, there’s still a healthy distance between -0.07 and -0.70, which marks the start of recessions.
US: Manufacturing PMI (1345 GMT) Manufacturing remains a weak spot for the US economy. The good news is that the sector’s trend is still mildly biased towards growth, but just barely.
Today’s flash data for the Manufacturing PMI for October will probably reconfirm the sluggish state of affairs in this corner of the economy. In the September update, the benchmark eased to 51.5, a three-month low. Although the reading is above the neutral 50 mark, the subdued trend remains conspicuous.
“The [PMI] survey saw firms pulling back on expanding production and focusing instead on cost-cutting, as inflows of new business slowed to the weakest seen so far this year,” IHS Markit’s chief business economist noted earlier this month.
Meantime, last week’s October sentiment updates for two US regions via Federal Reserve banks paint a muddy picture. The Philly Fed index continued to hold in positive territory but the New York Fed’s benchmark fell deeper into the red.
The implication: today’s flash PMI data for October will continue to hold steady, give or take, at a slow-growth reading of 51.5. In fact, that’s roughly what economists are looking for in today’s release. Econoday.com’s consensus forecast sees the PMI easing to 51.2. In short, slow growth is expected to become a bit slower.
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.