Archives of “Economy” category

rss

Ifo says that German industrial firms expect production to rise in the coming months

  
Analysis, Economy

Ifo remarks based on their latest production index in June

The index rose from -19.5 in May to +4.3 in June, marking its second biggest increase with industrial firms in Germany stating that they expect a further increase in production over the next three months.
That is a bit of a positive takeaway at least. Do note that the German industrial output figures for May are due at the top of the hour and should show a decent rebound from April but overall conditions should remain more subdued relative to a year ago.

Eurozone May retail sales +17.8% vs +15.0% m/m expected

  
Analysis, Economy

Latest data released by Eurostat – 6 July 2020

  • Prior -11.7%; revised to -12.1%
  • Retail sales -5.1% vs -6.5% y/y expected
  • Prior -19.6%
Retail sales activity rebounded strongly in the euro area in May, as lockdown restrictions were eased in most countries. But relative to a year ago, retail sales is still seen lower by a little over 5% – I would argue that the bounce has a lot to do with pent-up demand.
The real challenge will be to see how retail sales and consumption activity fare in Q3, once the new normal conditions start to become a base for the economy.
That will be more telling about how actual economic conditions are faring in the region and how consumer demand is holding up as we move on from the crisis in general.
EUR/USD continues to stay underpinned at around 1.1280-90 levels, but is keeping just under the high last week around 1.1300 for the time being.

Goldman Sachs forecast for US GDP growth revised down

  
Analysis, Economy

Goldman Sachs economists revised down their projection for economic growth in the US, to a contraction of 4.6% this year (from previous projection at -4.2%)

  • Contraction this quarter
  • bounce back on track from September
  • expect the US economy to grow 25% in Q3 (prior forecast of 33% for the qarter)
  • expect growth of 5.8% next year
Report published over the weekend.
GS citing:
  • some states imposing fresh restrictions to counter the spread of coronavirus
  • consumer spending likely to stall this month & next
  • “A combination of tighter state restrictions and voluntary social distancing is already having a noticeable impact on economic activity”
—
Last week from GS:
  • face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP
Some of the US administration are getting this through their skulls, VP Pence for example is now advocating mask wearing. Trump has not yet done so but surely its only a matter of time before he stops sacrificing people’s livelihoods on the alter of this stupid culture war?
Goldman Sachs economists revised down their projection for economic growth in the US, to a contraction of 4.6% this year (from previous projection at -4.2%)

Markit manufacturing PMI for June (F) 49.8 vs. 49.6 preliminary

  
Analysis, Economy

Markit Manufacturing PMI data for June 2020

MARKIT PMI data
  • market manufacturing PMI for June (F) 49.8 vs. 49.6 in the preliminary report. The reading is the high since February 2020
  • the reading below 50 represents the 4th consecutive month of contraction
  • new orders 50 vs. 49.5 in the preliminary report. Highest reading since February 2020
  • output rises to 47.5 vs. 34.4 in May. Highest reading since February 2020

Eurozone June final manufacturing PMI 47.4 vs 46.9 prelim

  
Analysis, Economy

Latest data released by Markit – 1 July 2020

The preliminary release can be found here. The slight revision higher is predicated by the better revisions in the French and German readings earlier as well.

Looking at the details, manufacturing output declined to a lesser degree in June compared to that of recent months but overall production continues to be undermined by subdued demand as new order books continue to show material weakness.
As such, I would argue that the “V-shaped recovery” in the headline readings are less suggestive of how the economic conditions are taking shape – especially once we get to July and August when firms work through their order backlogs.
Markit notes that:

“The final PMI numbers for June add further to signs that the eurozone factories are seeing a strong initial recovery as the economy lifts from COVID-19 lockdowns. The rise in the June survey is indicative of output falling at an annual rate of just 2%*. That compares with a near 30% rate of contraction seen at the height of the lockdowns in April. This remarkable turnaround implies very strong month-on-month gains in the official production numbers for the past two months.

“Expectations for the year ahead have also rebounded sharply as hopes grow that the economy will continue to find its feet again in the coming months.

“However, even with these gains, production and sentiment remain below pre-pandemic peaks, and persistent weak demand combined with ongoing social distancing measures are likely to act as a drag on the recovery. The focus therefore now turns to whether gains seen in the past two months can be built on, or if momentum fades again after this initial rebound.”

Go to top