Bundesbank releases their latest forecasts on the German economy
German GDP to grow by 3.2% in 2021, 3.8% in 2020
Says that projections don’t include the recent fiscal package by the government
Meanwhile, Bundesbank chief Weidmann also gives the thumbs up to the recent government action by saying that the fiscal support has been appropriate and the central bank takes a more positive view on the recent measures.
Comments by France finance minister, Bruno Le Maire
Again, just take all these forecast narratives with a pinch of salt because they will constantly change depending on economic developments in the coming weeks/months.
In April, Le Maire said that this will all just have a 8% impact on the French economy. And better yet, back in late February, he said that the virus impact will only chip away 0.1% of French economic growth. Good times.
The preliminary release can be found here. Little change relative to the initial estimate and this just reaffirms that while factory conditions have improved since April, they are still relatively subdued considering the economic fallout from the virus outbreak.
Looking ahead, the devil will be in the details when it comes to PMI readings. Headline figures should continue to see an improvement based on the survey question of “how is your business activity doing relative to the month before?”.
But for the manufacturing index, sub-indices such as new orders, output, and employment will be the key things to focus on moving forward.
Markit notes that:
“The manufacturing downturn looks to have bottomed-out in April, with production falling at a markedly slower rate in May. The improvement in part merely reflects the comparison against a shockingly steep fall in April, but more encouragingly was also linked to companies restarting work as virus lockdowns were eased. The further lifting of COVID-19 restrictions in coming months should provide a further boost to manufacturers.
“While we are still set to see unprecedented falls in industrial production and GDP in the second quarter, the survey brings hope that the goodsproducing sector may at least see some stabilisation – and even potentially a return to growth – in the third quarter.
“Whether growth can achieve any serious momentum remains highly uncertain, however, as demand – both domestically and in export markets – looks set to remain subdued by social distancing measures, high unemployment and falling corporate profits for some time to come.
“Headcounts continue to be cut at a rate not seen since the height of the global financial crisis in 2009 as firms scale-back capacity in line with weak demand. Prices charged for goods are meanwhile also still falling at a pace not exceeded over the past decade as manufacturers offer discounts to help clear warehouses of unsold stock. The labour market and profits could therefore deteriorate further in coming months, holding any recovery in check.“
Purchasing managers’ index (PMI) data for May from China’s National Bureau of Statistics (NBS).
Manufacturing PMI 50.6
expected 51.1, prior 50.8
expected 53.5, prior 53.2
Expansion for the manufacturing sector continued in May, although by a smaller margin than in April. Just over 80% of manufacturing business has now resumed says the NBS. Of the sub measures for this sector:
production down 0.5 points to 53.2
new orders + 0.7 to 50.9
new orders in 12 of the 21 sectors picked up
new export orders hit 35.3, a record low (global demand slumped)
For the services sector, expansion at a quicker rate in May than April. This will be welcome and should be read as further sign of a pick up in domestic demand. Respondents though were wary, over half of service sector firms reported insufficient demand in May. The NBS noted slow recovery only, especially for tourism, sports and entertainment.
Construction industry activity index in May 60.8 (59.7 in April)
new orders 58.0 (from 53.2)
I don’t suspect too much FX impact from this mixed result. We’ll soon find out, Monday morning trade is not far away!
We now await the next round of PMIs, the privately surveyed Caixin/Markit indicators.