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Eurozone October final manufacturing PMI 54.8 vs 54.4 prelim

  
Analysis, Economy

Latest data released by Markit – 2 November 2020

The preliminary release can be found here. A slight increase to the final reading, which is already predicated by the better revisions from France and Germany.
Markit notes that:

“Eurozone manufacturing boomed in October, with output and order books growing at rates rarely exceeded over the past two decades. However, while the data bode well for production during the fourth quarter, the expansion is worryingly uneven.

“By country, Germany was once again the star performer by a wide margin, as factories reported a surge in new orders that surpassed anything previously seen in the survey’s 25-year history. Italy, Spain and Austria also saw encouraging improvements in their recovery rates, but France, Ireland and the Netherlands all reported only modest growth and Greece has slipped back into contraction.

“Germany’s outperformance to a large extent reflects the recent pattern of demand growth. While orders for autos, business equipment and machinery have surged as the global economy has revived after lockdowns, benefitting German producers in particular, new orders for consumer goods came close to stalling in October, with exports even showing a renewed decline, blamed on rising COVID-19 infection rates, weakened labour markets and subdued consumer sentiment.

“The renewed weakness of consumer-facing businesses serves as a reminder that, while manufacturing as a whole may be booming for now, the sustainability of the recovery will depend on household behaviour returning to normal and labour markets strengthening. Given second waves of virus infections, this still looks some way off.“

China October Caixin / Markit manufacturing PMI 53.6 (vs. expected 52.8)

  
Analysis, Economy

A beat for the private survey PMI after the same for the official version released over the weekend

53.6
  • expected 52.8, prior 53.0
From the report, Key findings:
  • Output rises sharply amid quickest increase in total new work for nearly a decade 
  • Pandemic dampens growth of new export orders, however Business confidence reaches highest since August 2014
china pmi

China official PMIs for October: Manufacturing 51.4 (vs expected 51.3) Services 56.2 (expected 56.0)

  
Analysis, Economy

The manufacturing PMI fell from September but not by as much as expected (central median estimate).

Manufacturing 51.4

  • expected 51.3, prior 51.5

Non-manufacturing 56.2

  • expected 56.0, prior 55.9

Composite 55.3

  • prior 55.1

Official Purchasing Manager’s Index (PMI) from China’s National Bureau of Statistics.

  • All remain above 50 and in expansion.
China’s economy is still struggling out of the pandemic response earlier in the year, but the data from the country is improving quicker than elsewhere around the globe (China did come out of the harsh lockdowns earlier than other countries, having gone in first, and so far have avoided the large second-waves being seen presently in Europe and the US).
China’s services sector had been slower to recover but accelerated in Q3.
I can’t see this data having too much impact when FX markets open again on Monday, but join me then and we’ll soon find out!
The manufacturing PMI fell from September but not by as much as expected (central median estimate).

Eurozone Q3 preliminary GDP +12.7% vs +9.6% q/q expected

  
Analysis, Economy

Latest data released by Eurostat – 30 October 2020

  • Prior -11.8%
  • GDP -4.3% vs -7.0% y/y expected
  • Prior -14.7%

As predicated by the individual country readings earlier today, the rebound in the Eurozone economy was much stronger than estimated in Q3. That is a positive takeaway after the plunge in Q2 but amid the resurgence in the virus in recent weeks, optimism is fleeting.

The outlook for Q4 looks grim amid tighter virus restrictions and that takes away a lot of the “feel-good” factor from the last quarter. If anything else, it reaffirms the narrative that the economy cannot quite go back to normal while keeping the health crisis at bay.
Something has got to give and that means economic confidence/morale may be even

What does the record US GDP rebound really look like?

  
Analysis, Economy

Some perspective to the US Q3 advanced report yesterday

US GDP

On paper, the record rebound in US GDP in Q3 sounds stunning but it needs to be put into better context. Despite the bounce, overall economic output still remains well below pre-virus levels and there are caveats attached to it.
After accounting for the figures, nominal GDP remained 2.7% below its level in Q4 2019 (⬆️) and in real terms, it is seen 3.5% below its level at the end of last year.
While the rebound means that the US economy has recovered about 2/3 its output lost seen in Q2, the stimulus measures during the last few months were arguably a key reason helping to “prop up” the economy in the last quarter.
All of that has been stripped away ahead of the election and with the virus situation worsening, the outlook bodes ill for another major rebound – if there even is one – in Q4.

US Q3 advance GDP +33.1% vs +32.0% expected

  
Analysis, Economy

  • The first look at US Q3 GDP:

    • Best US quarter on record (following the worst quarter)
    • Q2 was -31.4%
    • Ex motor vehicles +26.3% vs -29.0%
    • Personal consumption +40.7% vs +38.9% expected
    • GDP price index +3.6% vs +2.9% expected
    • Core PCE q/q +3.5% vs +4.0% expected
    • Inventories added 6.62 pp to GDP
    • Business investment +20.3% vs -27.2% prior
    • Business investment in equipment +70.1% vs -35.9% prior
    • Exports +59.7% vs -64.4% prior
    • Imports +91.1% vs -54.1% prior
    • Inventories added 6.62 pp to GDP

    These are all breathtaking numbers but were largely expected. The consumption number stands out as a pleasant surprise but the business investment number is marginally negative, especially since those high investments in equipment were partly due to one-off covid changes (like installing dividers).

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