Daily Insight
Group Economics Macro & Financial Markets Research Nick Kounis & Aline Schuiling
Global growth fears
+31 20 343 5616
2 September 2015 • • •
Markets weighed down by worries about global growth … …following a set of soft manufacturing PMIs, led by emerging markets Meanwhile, decline in eurozone unemployment gains pace
Global growth concerns hit financial markets Investor risk appetite took another blow on Tuesday as concerns about the global economic outlook intensified. Equity markets headed lower for the second successive session. This erased some of the gains made post Black Monday. US Treasuries and the Japanese yen were the main beneficiaries. Official China PMI dropped as well The concerns about the global economy were fueled by a set of weak manufacturing PMIs. China’s official manufacturing PMI dropped to 49.7 in August from 50 in July, taking it to its lowest level since August 2012. This followed in the footsteps
Global manufacturing continues to slow % 3mo3M annualised
Index
14 12 10 8 6 4 2 0 -2 -4
58 56 54 52 50 48 10
11
12
Industrial production (lhs)
13
14
15
Manufacturing PMI (rhs)
of the previously-released Caixin PMI for China. Source: Thomson Reuters Datastream, Markit, CPB
Emerging markets lead the way The weakness was mirrored in most emerging market
Decline in eurozone unemployment gains pace
economies, where the aggregate PMI dropped to the lowest
Meanwhile, the unemployment rate in the eurozone fell from
level seen since April 2009, at the start of the recovery from
11.1% in June to 10.9% in July, reaching its lowest level since
the financial crisis. There was also a more moderate slowdown
the start of 2012. The series has been on a modest downward
in growth in the advanced economy PMIs, with Markit indices
trend since the start of 2013, but the pace of the decline seems
for the eurozone and US slipping. This left the global
to have increased in recent months. This probably reflects the
manufacturing PMI slowing further (to 50.7 from 51 in July)
pick-up in GDP growth after 2014Q3, as changes in the labour
leaving it consistent with very modest growth.
market tend to follow changes in economic conditions with some delay. Given our scenario of the eurozone economy
Manufacturing not the whole story
recovery gaining some momentum in the second half of this
The overall global economy is not as weak as suggested by
year, we expect the unemployment rate to remain on a solid
the manufacturing sector, as services are generally stronger in
downward path. As a result, it should reach levels that will start
most big economies. However, manufacturing is the most
pushing wage growth in the eurozone significantly higher in the
cyclical part, and there is little doubt that global growth is
course of next year.
currently only moderate, while downside risks have increased. Looking at the individual countries, the unemployment rate has Firmer growth ahead
fallen the fastest in Spain and Portugal since the start of the
We see three positives going forward. First, domestic demand
year. That said, the unemployment rate in Spain (22.2%) still is
in the US and the eurozone has been firming. Second, oil
one of the highest in the eurozone, while Portugal (12.1%) also
prices have come down, and this could also facilitate an easier
still has a relatively high rate. On the other side of the
monetary policy stance globally. Third, the Chinese authorities
spectrum, unemployment in Finland and Austria has risen
continue to take a range of measures to support demand. We
since the start of the year, reflecting economic weakness in
therefore see firmer growth ahead.
both countries.