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September Eurozone PMI Worse Than Expected

According to data out today from Caixin, the Chinese September PMI has fallen to 47.0 with a definitive value for August of 47.3; a 78-month minimum. The main reason for this slowing of manufacturing activity is the decline of domestic demand.

Later on we will have the numbers for the country’s manufacturing activeness. If they also come out weak, we will have a serious reason to believe that the government will have to wade in with even more economic stimulative measures in order to prop up the economy.

Preliminary September PMI figures for France’s manufacturing sector stood at 50.4 (forecasted: 48.5), whilst the figure for the service sector was set at 51.2 (forecasted: 51.0). Total preliminary French PMI data for September rose to 51.4 from August’s 50.2, which highlights the country’s reserved economic growth.

Nevertheless, French companies have had to really downsize their workforces, even with an increase in new orders which is the largest for the past ten months. As such, French resumption to the positive side of economic growth is still less than moderate and this fact is confirmed by today’s figures. Q2 GDP for the country showed no MOM change (previous: +0.7%, expected: 0.0%). Consumer expenditure in the country also remained unchanged in Q2, with investments in the economy down by 0.2%. Consumer spending in Q2 was also down by 0.1% due to a slow in wage inflation and increases in the CPI and taxes.

Germany’s preliminary September PMI came out a little worse than expected at 52.5 (forecasted: 52.8), with the service sector PMI also down at 54.3 (forecasted: 54.5) Germany’s total PMI for September has fallen from August’s 55.0 to 54.3.

All the while, Germany’s private sector is growing and this is set to continue for the months ahead. New order growth is at its highest for the past two years, whilst employment creation is also growing reasonably.

The Eurozone’s aggregate September PMI stood at 53.9 (forecasted: 54.1, previous 54.3). Here we could be talking about a slight slowdown in economic growth for the region in September, although the increase in new orders could indicate a localised character to the drawdown.

European companies are continuing to hire and build up raw material reserves, meaning that they expect a far-reaching resumption of economic growth for the region. In the meantime, prices are still stood on the spot with inflation less than the ECB would like.

The ECB’s chief economist announced on Monday that immediate measures will be taken in cases where low inflation threatens economic growth in developing markets and a worsening of financial conditions. The ECB is as such declaring its readiness to expand its bond purchasing programme.

Today a message from the ECB was published which indicated a growth in the share of Asset-Backed Securities (ABS) in relation to the total amount of purchases made by each of the 19 central banks of the Eurozone. At the same time, the total number of ECB ABS purchases as part of its QE programme remains unchanged.

The euro/dollar is slightly up after the PMI figures were published. A stronger impulse for growth could come from speeches by Mario Draghi (ECB chief) and Fed member Lockhart (holds a vote in US interest rate decision).

Today it’s worth having a look at data for Canadian retail sales, business activity in the manufacturing sector for the US and US oil reserves from the EIA.

The day is full of speeches. Here I’ll give a special mention to the ones due to be given by: Mario Draghi (ECB), Ben Broadbent (BoE), Dennis Lockhart (FOMC).

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