Purchasing Manager Surveys, Election Results, and a Fast-Approaching Review of ECB Policy
June 3, 2024
Indian Prime Minister Modi’s NDA coalition appears to have won a commanding election victory, extending his ten years of service into a third five-year term. On the strength of his big win, plus an upwardly revised 7.8% on-year GDP growth rate in the first quarter, India’s stock market soared 3.4% this Monday.
Mexican elections over the weekend produced a similarly huge win for the left-of-center Moderna Party. Claudia Sheinbaum, the former mayor of Mexico City, will become the country’s first woman president when Lopez Obrador’s six-year term expires in early December, and it appears she will have solid majorities in both houses of Mexico’s congress. Presidents can serve only one term. Unlike India’s example, financial markets reacted adversely to this continuity of political power. The dollar jumped 3.3% against the peso in early trading this Monday.
Against other currencies so far today, the dollar fell 0.3% and 0.1% against the yen and Swiss franc but rose 0.1% relative to the euro and sterling. The European Central Bank’s Governing Council is expected to implement an initial interest rate cut on Thursday.
Ten-year sovereign debt yields have dropped six basis points in Italy, five bps in Spain and France, four bps in Germany and the U.K., three bps in the United States and a basis point in Japan.
Stock markets in the Pacific Rim advanced 1.7% in Taiwan and South Korea, 1.8% in Hong Kong, 0.9% in Indonesia, 0.8% in Australia and 1.1% in Japan but fell by 0.3% in China whose economic performance in the region is now being eclipsed by India.
Oil ministers in OPEC+ agreed to extend production cuts through September, but West Texas Intermediate oil is hovering around $77 per barrel and 0.4% below its May closing level. Bitcoin’s price strengthened 2.2%, while gold is generally steady.
Today’s data release menu has been dominated by manufacturing purchasing manager surveys for May.
- Euroland’s PMI printed at a 14-month high of 47.3 despite a 0.1-point downward revision from the preliminary indication. Spanish and Dutch PMI readings of 54.0 and 52.5 were at 26- and 21-month highs, and the Greek score (54.9) was also in expansionary territory though lower than April’s result. After a year of sub-50 readings, an end to Euroland’s factory sector recession may be approaching. Improved results from Germany are particularly heartening.
- The n printed 2.1 points above April’s 49.1 at a 22-month high of 51.2. Orders and output sub-readings were at 25-month highs, confidence regarding conditions a year from now rose to a 2-year high.
- The Swiss PMI rose to a 14-month high but remained significantly under the 50 no-change threshold at 46.4.
- Sweden‘s 54.0 PMI score in May was 2.6 points above April’s reading, while Norway‘s PMI edged down 0.3 points to a 2-month low of 52.3.
- Hungary‘s PMI was unchanged from April’s 3-month low of 51.8. Poland‘s manufacturing PMI fell 0.9 points to a 7-month low of 45.0, while the Czech index rebounded 1.4 points and was just 0.1 point below March’s 19-month high of 46.2. Russia’s factory index printed at a 2-month high of 54.4. Western economic sanctions have been pretty ineffective.
- Japan‘s PMI revised reading of 50.4 was 0.1 point below the flash estimate but still at a one-year high.
- China‘s privately compiled manufacturing PMI rose 0.3 points to a 23-month high of 51.7, while India‘s PMI was revised to a 3-month low but still robust 57.5.
- Elsewhere in Asia, South Korean and Taiwanese PMI readings in May of 51.6 and 50.9 were their best scores in 24 and 25 months, respectively. Vietnam’s 50.3 matched April’s 2-month high. Indonesia’s PMI declined 0.8 points to a 6-month low of 52.1, while the Filipino PMI dipped 0.3 points to a 2-month low of 51.9.
- Australia‘s 49.7 reading was 0.1 point above its preliminary estimate and at a 4-month high.
- Brazil‘s factory PMI sank 3.1 points to 52.1, its lowest score since December.
- Turkey‘s 48.4 PMI reading was also at a 5-month low.
Turkey also reported some dismal inflation data for May. The CPI jumped 3.37% on month, accelerating the 12-month rate of increase to an 18-month high of 75.45%, up from 38.2% in June 2023 but still below a 24-year peak of 85.5% in October 2022. Turkish producer price inflation also rose in May to a 14-month high of 57.7%. And by the way, U.S. voters dismayed about the rise of inflation earlier under President Biden’s watch might want to know that Turkey has for a strongman leader. So does Argentina with even more runaway CPI inflation of 289%.
Indonesian CPI inflation slowed last month to a 3-month low of 2.8%, but core consumer price inflation rose 0.1 percentage point to an 8-month high of 1.9%. Consumer price inflation of 8.5% in Kazakhstan during May was its lowest in 28 months and down from a peak in early 2023 of 21.3%.
Pakistani producer price inflation of 9.9% last month has dropped from a high of 41.3% in August 2o22, while consumer price inflation has slowed to a 30-month low of 11.8% from its high of 38% in May 2023.
Business capital spending in Japan recorded a significantly slower-than-projected 6.8% year-on-year advance last quarter, down from 16.4% posted in the final quarter of 2023.
Just In: Canada’s manufacturing purchasing managers index did not move above the 50 threshold in May as was expected but instead dipped 0.1 point to a 4-month low of 49.3. And the S&P Global U.S. manufacturing PMI has been revised up 0.4 points to a 2-month high of 51.3 but was accompanied by indications of higher input and output inflation.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: manufacturing purchasing managers surveys May 2024, Mexican and Indian election results, Turkish CPI and PPI
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