Preliminary Purchasing Manager Readings for June Beating Expectations

June 23, 2020

PMI readings for Euroland, Germany, France, and Great Britain show a V-shaped pattern.

Other themes of today include

  • A further disturbing rise in the Covid-19 numbers. Global cases rose about 145,000 in the past 24 hours, 31k of which were reported in the United States.
  • U.S. President Trump’s opinion poll approval ratings continue to erode. There was another big discrepancy between what he said and what key advisers are saying. Chief trade negotiator Peter Navarro on Fox claimed a deal with China had collapsed, and then Trump clarified that the trade deal remains intact.
  • There have been central bank interest rate cuts in both Paraguay and Hungary.
  • Share prices have rallied in many centers, the dollar is softer, and oil’s price rose 2%.

Euroland’s composite purchasing managers index leaped 15.6 points to a 4-month high of 47.5 in June. The recent and alltime low had been 13.6 in April, and the month-on-month rise was by a record amount. The manufacturing and service sector scores were similar in June at 46.9 and 47.3, and each represented a 4-month high. But being below 50, they signal a much slower rate of contraction rather than a return to actual positive growth. Germany’s composite, manufacturing, and service PMI readings in June of 45.8, 44.6, and 45.8 are 4-month highs.

French PMIs did break above the 50 threshold, signifying a return to positive growth. The composite PMI of 51.3 was up from a low of 11.1 in April and close to February’s 51.9 reading.

Britain’s composite PMI, like Euroland’s, recorded its greatest ever month-to-month advance, rising to 47.6 in June from 30.0 in May and 13.8 in April. Before the pandemic, such was 53.0 in February. Analysts were expecting the composite score to be still lower than 42 this month.

Australia’s composite PMI compiled by CBA catapulted 24.5 index points to a one-year high of 52.6 in June from 28.1 in May and the recent low of 21.7 scored in April. This was the first reading above 50 since January.

By comparison to the above reports, Japan’s PMI results were disappointing, but the composite score of 37.9 was nonetheless at a 4-month high. The composite reading had dropped from 51.0 in January to a low of 25.8 in April and then edged up to 27.8 in May. Most disappointing, however, the PMI for just manufacturing in Japan slid another 0.6 points to a 136-month low of 37.8.

The dollar is unchanged against the yen but down 0.7% against the peso, 0.5% relative to the euro, 0.4% versus the loonie, 0.3% vis-a-vis the kiwi, and 0.2% against the Swiss franc.

The price of gold has moved further above $1,760 per ounce.

Stock markets in Europe so far show daily advances of 2.8% in Germany, 1.9% in Italy and Spain, 1.8% in France, and 1.4% in Great Britain. Markets in Asia closed up 1.6% in Hong Kong, 1.5% in India, and 0.5% in Japan. A likely higher open is signaled by U.S. futures.

Ten-year sovereign debt yields have climbed 3 basis points in Germany and by 2 bps in the U.S. and Great Britain.

Producer prices in South Korea were 1.7% below their year-earlier level for a second consecutive month in May. That compares with a 1.1% 12-month rate of rise in January.

Filipino retail price inflation slowed 0.4 percentage points to a 6-month low of 0.7% in April.

Singaporean consumer prices posted their largest on-year decline (0.8% in May) in four years.

Between May 2019 and May 2020, industrial production and retail sales in Taiwan respectively rose 1.5% and fell 5.8%. A 10.2% plunge of sales in April had been the steepest since 2009. Taiwan’s jobless rate of 4.16% last month was its highest in 79 months.

South African unemployment last quarter of 30.1% was a percentage point above the level in the final quarter of 2019 and the most ever in this data series that started in 2008. South Africa’s leading economic index dived 5.1% in April to 97.2 after a 0.9% drop in March to 102.4.

The base rate of the Central Bank of Hungary, which had been at 0.90% since a 15-basis point reduction exactly four years ago, was reduced by another 15 basis points to 0.75%. CPI inflation this year is expected to hover between 3.0% and 3.5% and to average even less in 2021. The overnight deposit rate was left unchanged at -0.05%. A released statement explains

Due to strong disinflationary effects, the outlook for inflation has shifted downwards persistently, while Hungarian economic performance this year is likely to be more subdued than earlier expected.

Paraguay’s central bank rate cut to a record low of 0.75% was a half percentage point in size and the fifth reduction enacted in 2020 after ones of 25 basis points on March 13, 50 bps on March 23, and a full percentage point on both March 30th and April 22nd. Weaker growth this quarter than previously assumed has been associated with a drop in inflation as well in this South American economy.

U.S. data releases today will include new home sales, the Richmond Fed manufacturing index, and the IHS-compiled manufacturing and service-sector preliminary purchasing manager survey findings.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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