3 Numbers to Watch: EU PMI, US jobless claims, US PMI ==================================== Thursday brings a number of reports for assessing the economic outlooks in Europe and the US, including several flash PMI numbers for October. The initial estimate for the EU PMI will be of particular interest in the wake of recent news that suggests that Europe has emerged from recession. Later, we’ll see new data for US jobless claims, followed by the flash US PMI report. EU PMI: The Bank of Spain advised yesterday that the countrys gross domestic product (GDP) eked out a small gain of 0.1 percent in the third quarter. The rate of increase is unimpressive, but the revival of growth of any degree for the first time since 2011 is significant. We also learned yesterday that consumer confidence in the Eurozone improved again this month while business sentiment in France ticked up in October to a two-year high. This survey [for France] confirms that the French economy is reaching a turning point mainly thanks to better foreign orders, an ING Bank economist says. Another test for deciding if Europe’s recession really has passed into the history books arrives with today’s flash numbers for the manufacturing and services purchasing managers indices (PMI). The September update reflected a bit of weakness in manufacturing but the services sector increased to a 27-month high. Economists, however, think we’ll see both PMIs rise in today’s initial estimate. If the consensus forecast holds, the PMI data will add two more data points to the growing list of numbers that suggest Europe’s recession is dead and buried. Even so, the recovery is likely to deliver sluggish growth for the near term, particularly outside of Germany. But at this stage the market will still cheer the mounting signs that the business cycle has finally turned positive for the Eurozone overall. US Jobless Claims: With macro uncertainty still elevated in the wake of the recent government shutdown, today’s weekly update on new filings for unemployment benefits will be closely watched as the market looks for clarity on the state of the US economy. It didnt help that this week’s delayed September payrolls update revealed substantially slower growth versus the previous month: a rise of 148,000, or considerably below the 198,000 advance reported for August. It’s unclear if the downshift is related to the government shutdown, although many economists think that’s a factor. In any case, there’s less confidence at the moment that the US economy has emerged unscathed from the fiscal war in Washington. The recent numbers in the jobless claims reports have only muddied the water further. Although last week’s update showed that new filings dropped, the total is still elevated, relative the range we’ve seen in recent months. But here too there may be temporary factors mucking up the data, thanks to reporting glitches in some states in recent weeks. All the more reason why the crowd will pay close attention to today’s release for a fresh read on October. The consensus forecast sees another decline, with claims dropping to 335,000. That would certainly support confidence a bit. But beware: until, or if, we see more encouraging data, it’s safe to assume that a worse-than-expected number today won’t be easily dismissed. US PMI: Markit’s estimate of manufacturing activity in the US has been trending down lately, suggesting that this cyclical sector has hit a rough patch. But the softer side of manufacturing by this benchmarks accounting contrasts with the numbers in the competing ISM Manufacturing Index, which increased to its highest level in more than two years in September. Which indicator is right? It’s hard to say at this point, although eventually the truth will out. Over time, the differences tend to wash out and so the two metrics generally tell a similar narrative through time. But for the moment, there’s some confusion and so today’s report will be carefully reviewed for fresh context. Unfortunately, the crowd may be disappointed in the search for additional clarity. Economists project that today’s PMI number will slip by the smallest of fractions to 52.7 in October, down a hair from the previous months 52.8. If so, that’s not going to be terribly helpful for sorting out this months big-picture trend. As for the October update for the ISM Index, the next report is more than a week away: November 1.
Posted on: Thu, 24 Oct 2013 07:43:11 +0000
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