EU Manufacturing PMI

a leading indicator of growth in manufacturing

how much will the manufacturing sector grow next?

EU Manufacturing PMIs:

• PMIs at 50.8 have been improving since last month (in a positive quarterly trend); in more detail, they moved up by 1.3 points (from 49.5 to 50.8 points) since the previous reading and moved up by 1.20 points (from 49.6) over the quarter
• PMIs remain positive, indicating fair growth to come next

IntroBased on a monthly survey of supply chain managers across multiple industries, the Purchasing Managers Index (PMI) summarizes whether business conditions - and thus economic growth - are either expanding, staying the same, or contracting, as viewed by purchasing managers.

Chart typeIn this chart we show the Manufacturing PMI, a weighted average of manufacturing and service sectors together.

How to read itA PMI reading above 50 indicates that the economy is likely to expand in the upcoming months (positive GDP growth). Conversely, a PMI below 50 often signals a slowdown in economic activity and can be linked to a decline or slower growth in GDP.

Market implicationsHigher growth prospects are likely to bring higher company earnings in the future, and thus normally push equities up, same things equal.

Consumer confidence & retail sales in EU

consumer spending trends

how do EU consumers feel about the future?

Consumer confidence:

• has now reached -11.7 in Europe
• has remained unchanged vs a month ago
• are fragile in negative territory, indicating mild economic contraction to come next, improving since last month (in a positive quarterly trend)

Growth in retail sales:

• is up by 0.3% MoM, and up by 3.0% YoY
• it remain fragile in negative territory, indicating mild economic contraction to come next and it has been declining since last month (continuing its negative quarterly trend)

The 3-month correlation between consumer confidence and retail sales is currently noData-0.24.

In summary weak correlation between confidence and retail sales suggests a current disconnect between the two variables that is not normal: consumers seem undecided on what economic prospects will come next.

Consumer confidenceConsumer confidence measures how consumers are feeling about their expected financial situation: happy and confident consumers are likely to spend more, while unhappy consumers are likely to spend less.

ImplicationsHappy consumers spending more will stimulate the economy, pushing growth up. Unhappy consumers will save more and spend less, a behavior that in aggregate will cause the economy to slow down and eventually flip into recession.

Retail salesRetail sales track consumer demand for finished goods and are key to exactly confirm - as indicated above - how much consumers have been spending as of late, taking the pulse to the economy and tracking any inflationary pressures that may exist.