Daily Insight
Group Economics Macro & Financial Markets Research
2 June 2016
Global manufacturing in the doldrums Nick Kounis Head Macro & Financial Markets Research Tel: +31 20 343 5616 nick.kounis@nl.abnamro.com
Global manufacturing PMI points to continued stagnation in May
Manufacturing PMIs broadly stable at lows in eurozone, US and China…
…though bellwether US ISM index painted a more optimistic picture
We expect a moderate improvement going forward, though risks remain
Global manufacturing still in a rut The global manufacturing PMI inched down to 50 in May from 50.1 in April, suggesting that the sector continues to stagnate. The more forward looking components of the survey such as new orders remained at weak levels, indicating that a significant improvement is not imminent. In addition, the manufacturing exports index fell further below the 50-mark, which does not bode well for world trade (see chart). Manufacturing remained depressed in the large economies. The eurozone manufacturing PMI fell to 51.5 from 51.7, China’s remained at 50.1, while the US Markit PMI index edged down to 50.7 from 50.8. If there was one ray of light in yesterday’s releases, it came from the US ISM manufacturing index. Although it is not included in calculating the global aggregate (as the Markit measure is preferred) it is a survey with a long and distinguished history as a business cycle indicator. It beat expectations in May, rising to 51.3 from 50.8. The new orders index in the survey has been at relatively elevated levels over the last few months, so could be a sign of better times ahead.
Global growth still in the doldrums Index
% yoy
6 5 4 3 2 1 0 -1 -2 -3
53 52 51 50 49 48 13
14
15
Global PMI exports (lhs)
Source: Thomson Reuters Datastream
Insights.abnamro.nl/en
16 World trade (rhs)
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Daily Insight – Global manufacturing in the doldrums – 2 June 2016
Moderate improvement going forward Indeed, there are reasons to think that global manufacturing and the world economy more generally will see a moderate improvement over the next months. A number of factors that drove the soft patch in global growth have improved, though they may take some time to gain some traction. For instance, financial conditions have clearly eased, helped by an upturn in investor sentiment following reflation efforts by central banks. Capital has started to flow back into emerging markets over the last few months after sharp outflows previously. Finally, oil prices have recovered, which should help alleviate some of the stress that the previous low levels were causing for producers. Risks remain Having said all this, risks remain. Vulnrabilities remain in the US and other advanced economies and even more so in emerging markets, and there are question marks about whether they would be able to digest Fed rate hikes. Financial risks in China remain high and if anything have only increased. Finally, political risks from Brexit, to the Spanish elections, to the US Presidential elections remain significant.
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Daily Insight – Global manufacturing in the doldrums – 2 June 2016
Day
Date
Time
Country
Monday Monday Monday Monday Monday
30/05/2016 30/05/2016 30/05/2016 30/05/2016 30/05/2016
02:35:00 06:30:00 11:00:00 14:00:00
US NL EC DE BE
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016
01:30:00 01:50:00 09:55:00 10:00:00 11:00:00 11:00:00 11:00:00 14:00:00 14:30:00 14:30:00
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
Fed's Bullard speaks Producer confidence manufacturing - index Economic sentiment monitor - index CPI - % yoy CPI - % yoy
May May May P May
4.4 104.7 0.1 2.0
104.2 0.1
4.2 104.5 0.2
15:45:00 16:00:00
JP JP DE EC EC EC EC IN US US US US US
Unemployment - % Industrial production - % mom Unemployment - % M3 growth - % yoy Core inflation - % yoy CPI - % yoy Unemployment - % GDP - % yoy PCE deflator core - % mom PCE deflator core - % yoy S&P/Case Shiller house price index Chicago Fed - business confidence - index Conference Board cons. confidence - index
Apr Apr P May Apr May A May Apr 1Q Apr Apr Mar May May
3.2 0.3 6.1 4.6 0.8 -0.1 10.2 7.3 0.2 1.6 0.9 49.3 92.6
01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016
03:00:00 03:00:00 03:45:00 09:00:00 10:00:00 10:30:00 14:00:00 15:45:00 16:00:00 20:00:00
CN CN CN NE EC GB BR US US US
PMI manufacturing - index (official) PMI non-manufacturing - index (official) PMI manufacturing - index (Caixin) PMI PMI manufacturing - index PMI manufacturing - index GDP - % yoy Markit - Flash PMI ISM manufacturing - index Fed Beige Book
May May May May May F May 1Q May F May
50.1 53.1 49.2 52.7 51.5 50.1 -5.4 50.7 51.3
51.5
50.7
50.5
Thursday Thursday Thursday Thursday Thursday Thursday
02/06/2016 02/06/2016 02/06/2016 02/06/2016 02/06/2016 02/06/2016
13:45:00 13:45:00 13:45:00 14:15:00 14:35:00 19:00:00
EC EC EU US US US
ECB Main Refinancing Rate - % ECB Deposit Facility Rate - % ECB Marginal Lending Facility Rate - % ADP nat. employment report - thousands Fed's Powell discusses Prudential regulation (v) Fed's Kaplan speaks on economy (nv)
Jun 2 Jun 2 Jun 2 May
0.0 -0.4 0.25 155.7
0.0 -0.4 0.25 180
0.0 -0.4 0.25 165.0
Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday
03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016
03:45:00 03:45:00 09:45:00 10:00:00 10:00:00 10:30:00 11:00:00 14:30:00 14:30:00 14:30:00 14:30:00 16:00:00
CN CN US EC EC GB EC US US US US US
PMI services - index (Caixin) PMI composite - index (Caixin) Fed's Evans speaks on economy and policy (nv) Composite PMI output PMI services - index PMI services - index Retail sales - % mom Trade balance - USD bn Change in employment private employment - thousands Change in employment total - thousands Unemployment - % ISM non-manufacturing, index
May May
51.8 50.8
May F May F May Apr Apr May May May May
52.9 53.1 52.3 -0.5 -40.4 171 160 5.0 55.7
2.8 6.2 5.0 0.8 -0.1 10.2 7.5 0.2 1.6 0.7 54.9 96.8
6.2 5.0 0.7 -0.2 10.2 7.5
95.0
50.0 49.2 53.0
52.9 53.1 0.3 -43.1 163 174 5.0 55.7
0.2 160 170 5.0 55.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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