Group Economics
Daily Insight
Macro & Financial Markets Research Arjen van Dijkhuizen, Aline Schuiling, Kim
Global manufacturing weakness
Liu +31 20 343 5606
24 September 2015
China leads decline in global manufacturing PMI’s; more stimulus expected to keep slowdown gradual Downside risks to eurozone inflation are building… … but Mr Draghi dampens market prospects for more QE
China leads decline in global manufacturing PMI’s
Eurozone’s composite PMI resilient
The flash estimates for the main manufacturing PMIs declined in September, adding to the evidence that the global manufacturing sector is cooling down. In the US it was
60
unchanged at 53, weaker than the average of the past few
55
years. Meanwhile China’s flash manufacturing PMI published
50
by Caixin/Markit fell to 47.0, the lowest level in 6.5 years. Most
45
sub-indices, including new orders and new export orders fell
40
further. Still, Caixin’s survey focuses on small and medium-
35
sized enterprises. These are benefiting less from the government’s general easing policies, although they will profit from targeted policies directed at SMEs. The Manufacturing
1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 -2.5 -3.0
30 04 05 06 07 08 09 10 11 12 13 14 15 GDP (rhs)
Composite PMI (lhs)
PMI reported by NBS, which includes large (state) enterprises, is less bleak, although it dropped to 49.7 in August.
Source: Thomson Reuters Datastream
China’s government stimulus to keep slowdown gradual Looking at the broader economy, services are holding up better than industry. The Services PMIs are still well above the neutral 50 mark. Moreover, government stimulus typically works with some lag. The government is adding fiscal stimulus, particularly in the form of infrastructure spending. Fiscal spending rose rapidly in July/August, and the effects will likely start to filter through soon. We also expect more monetary
Downside risks to eurozone inflation are building… The price components of the eurozone’s PMI report showed that global manufacturing prices continue to decline, adding to the evidence that downside risks to eurozone inflation are building. The manufacturing input price index dropped 44.1 in September from 49.6 in August, while the output price index fell to 48.8 from 50.5.
easing, such as further policy rate cuts (25 bp in 2015) and RRRs (200 bps in 2015-16). The PBoC will also keep using its standing facilities, targeted lending to state banks and targeted RRR cuts for banks with a specific mandate (e.g. SMEs).
… but Mr Draghi dampens market prospects for more QE In a speech before European parliament, ECB president Mario Draghi confirmed that renewed downside risks to the inflation outlook have emerged. Inflation is still expected to rise towards
Eurozone PMIs resilient Although the eurozone’s manufacturing PMI fell as well in September (to 52.0 from 52.3 in August), the overall composite PMI was quite resilient. It declined to 53.9, down from 54.3 in August. As such, it has returned to its July level, which is consistent with GDP growth of around 0.4-0.5% qoq. We think the positive impact of strengthening domestic demand and the euro depreciation since the middle of last year, compensates for a weakening global economy. This picture was also painted by consumer confidence, which, on balance, increased slightly between September and July, despite the correction on equity markets. Sentiment probably benefited from the ongoing gradual labour market recovery and rising real wages.
the end of the year, although the increase will be marginally lower than expected. He reiterated his dovish stance that the QE programme can be altered in size, composition and duration. However, Mr Draghi also downplayed the likelihood of immediate action. According to the Mr Draghi, the ECB needs more time to asses if current downside risks to the outlook are of permanent or transitory nature. Similar remarks were made earlier today by the Governing Council members Nowotny and Jazbec. Despite these remarks, we still stick to our base case scenario that the ECB will step up its monthly QE purchases by EUR 20bn before year end.
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Global manufacturing weakness – 24 September 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1174
0.4495
-1.1937
-7.6529
120.49
0.4334
-0.1492
0.5424
AUD/USD
0.7034
-0.5936
-2.1152
-13.8518
USD/CHF
0.9747
0.1233
0.7026
-1.9318
NZD/USD
0.6270
-0.2704
-1.3220
-19.5638
GBP/USD
1.5252
-0.7871
-1.4920
-2.1115
USD/SGD
1.4253
0.4865
2.0477
7.6023
USD/CAD
1.3286
0.0753
0.8502
14.3866
Bond markets
Close
Change 1 day
Change 5 days
Change YTD
2-year German Govt Bond yield
-0.2470
0.0150
-0.0270
-0.1490
10-year German Govt Bond yield
0.6170
0.0270
-0.1570
0.0760
Yield curve Germany
0.8640
0.0120
-0.1300
0.2250
2-year US Treasury Bond yield
0.7032
0.0294
-0.1076
0.0387
10-year US Treasury Bond yield
2.1657
0.0320
-0.1283
-0.0055
Yield curve US
1.4625
0.0026
-0.0207
-0.0442
US 2-year sw ap rate
0.8023
0.0169
-0.1003
-0.0920
US 10-year sw ap rate
2.1665
0.0362
-0.1258
-0.1196
US sw ap curve
1.3642
0.0193
-0.0255
-0.0276
EU 2-year sw ap rate
0.0560
0.0080
-0.0235
-0.1190
EU 10-year sw ap rate
0.9870
0.0230
-0.1140
0.1750
EU sw ap curve
0.9310
0.0150
-0.0905
0.2940
-0.0390
0.0000
-0.0020
-0.1170
0.3260
0.0068
-0.0095
0.0704
18.6800
18.9500
35.5500
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month JPMorgan EMBI Plus Sovereign S
422.9900
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
18,070
-1.96
-1.06
3.55
Hang Seng Index
21,303
-2.26
-3.02
-9.75
Hang Seng China Enterprises Index
9,570
-2.70
-3.38
-20.15
Australian Stock Exchange S&P/ASX 200 Index
4,998
-2.07
-1.98
-7.63
Singapore Straits Times Index
2,846
-0.79
-0.80
-15.43
Euro Stoxx 50 Index
3,095
0.60
-4.83
-1.65
S&P 500 Index
1,942
-0.01
-2.65
-5.65
MSCI World Daily Total Return Gross USD
725
-1.65
-1.80
-5.55
AEX Index
421
0.29
-3.95
-0.77
-0.85
4.22
15.89
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return
22
Close
Change 1 day % Change 5 days %Change YTD%
195
-1.03
-2.09
-15.26
1,132
0.63
1.10
-4.48
Generic first NYMEX Crude Light future
47
0.54
-1.15
-12.50
Generic first Brent Crude Oil future
50
0.94
-0.42
-13.59
5,088
0.20
-5.41
-19.24
503
1.56
3.07
-14.67
Gold spot USD/Oz
LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source: Bloomberg
3
Global manufacturing weakness – 24 September 2015
Day
Date
Time
Country
Sunday Sunday Sunday
13/09/2015 13/09/2015 13/09/2015
07:30:00 07:30:00 07:30:00
CN CN CN
Monday Monday Monday Monday Monday
14/09/2015 14/09/2015 14/09/2015 14/09/2015 14/09/2015
06:30:00 09:00:00 11:00:00 14:00:00 15:45:00
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
15/09/2015 15/09/2015 15/09/2015 15/09/2015 15/09/2015 15/09/2015 15/09/2015 15/09/2015
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Retail sales - % yoy Industrial production - % yoy Fixed asset investment - % yoy
Aug Aug Aug
10.5 6.0 11.2
10.6 6.5 11.2
JP CH EC IN EC
Industrial production - % mom Foreign currency reserves - CHF mln Industrial production - % mom CPI - % yoy ECB announces weekly QE details
Jul F Aug Jul Aug
-0.6 531820 -0.4 3.8
#N/A N/A 0.3 3.6
0.4
10:30:00 11:00:00 14:30:00 14:30:00 15:15:00 16:00:00
NL GB DE US US US US JP
Government presents Budget 2016 CPI - % yoy Aug ZEW index (expectation economic growth) Sep Retail sales - % mom Aug Empire State PMI - Manuf. general business conditions - index Sep Industrial production - % mom Aug Business inventories - % mom Jul Annual rise in monetary base Sep 15
0.1 25.0 0.6 -14.9 0.6 0.8 80.0
0.0 17.7 0.3 -0.5 -0.2 0.2 80.6
0.0 10.0 0.4
16/09/2015 16/09/2015 16/09/2015 16/09/2015 16/09/2015 16/09/2015 16/09/2015 16/09/2015
10:30:00 10:30:00 11:00:00 14:30:00 14:30:00 14:30:00 14:30:00 16:00:00
GB GB EC US US US US US
Claimant count unemployment rate - % Change in claimant count - thousands Core inflation - % yoy Inflation excl food and energy - % mom Inflation excl food and energy - % yoy Inflation (CPI) - % mom Inflation (CPI) - % yoy NAHB home builders' confidence index
Aug Aug Aug F Aug Aug Aug Aug Sep
2.3 -4.9 1.0 0.1 1.8 0.1 0.2 61.0
2.3 -5.0 1.0 0.1 1.9 0.0 0.2 61.0
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
17/09/2015 17/09/2015 17/09/2015 17/09/2015 17/09/2015 17/09/2015 17/09/2015 17/09/2015 17/09/2015 17/09/2015
01:50:00 09:30:00 09:30:00 09:30:00 09:30:00 10:30:00 14:30:00 16:00:00 20:00:00 20:30:00
JP NL CH CH CH GB US US US US
Merchandise trade exports - % yoy Unemployment rate SNB 3-month ibor lower target SNB 3-month ibor upper target SNB Sight Deposit Interest rate Retail sales - % mom Housing starts - % mom Philadelphia Fed - business confidence - index Targe range for fed funds rate Fed Chair Yellen holds press conference
Aug Aug Sep 17 Sep 17 Sep 17 Aug Aug Sep Sep 17 Sep-17
7.6 6.8 -1.3 0 -0.75 0.1 0.2 8.3 0-0.25%
Friday
18/09/2015
09:30:00
NL
Consumer confidence - index
Sep
6
ABN AMRO
0.1 1.9 -0.1 0.2
6.8 -1.3 0 -0.75 -4.5 5.9 0.25-0.50%
-4.0 7.0 0-0.25%
7
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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