European Growth and Inflation Weakened This Month

September 23, 2024

Investors appear satisfied that Fed officials chose the larger 50-basis point cut option last week. U.S. equity futures are retaining though not extending last week’s stock market rally. A final estimate of U.S. second-quarter GDP and August personal consumption and the PCE price deflator headline this week’s data menu.

Preliminary September preliminary purchasing manager survey findings for the euro area and Great Britain out this morning are weaker than anticipated. Financial markets aren’t set up for a third European Central Bank rate cut until December, but these new data provide some reasonable doubt regarding the sooner October policy meeting. The dollar rose 0.5% overnight against the euro and 0.2% relative to sterling.

Japan‘s market is closed today as that country observes the Autumnal Equinox holiday. The closure didn’t prevent the yen from recovering 0.3% against the dollar overnight. A more dovish message than expected from the Bank of Japan last Friday had pushed the yen lower before the weekend.

In other stock markets around the Pacific Rim this Monday, Share prices rose by 0.6% in Taiwan and 0.4% in China, buoyed by a 10-basis point cut in the People’s Bank of China two-week reverse repo rate to 1.85%. Equities also closed up 0.5% in India and Singapore but fell by 0.7% and 0.6% in Australia and New Zealand.

Australia’s composite purchasing managers index fell to an eight-month low and sub-50 reading of 49.8 in September from 51.7 in August and 53.3 last March. The manufacturing PMI hit a 52-month low, and services printed at a 2-month low of 50.6, implying much slower growth than earlier in the year when such was as high as 54.4.
India’s preliminary composite PMI (59.3), manufacturing PMI (56.7) and services index (58.9) were at respective 9-, 8- and 10-month lows. As in Australia, the results undershot analyst expectations but, unlike Australia, were at levels consistent with a strong rate of growth.

Great Britain’s composite PMI dipped 0.9 points below August’s 4-month high to a 2-month low of 53.5. The British service sector also registered at a 2-month low (52.8), while manufacturing fell to a 3-month low of 51.5. These results also were lower than forecast. A separate British data release today, the monthly CBI industrial trends survey, paints a weak orders picture at a 10-month low and considerably worse than had been presumed.

Euroland PMI results produced a big disappointment, depicting a deeper recession in manufacturing and almost stagnant conditions in the service sector. The one silver lining was that the input price component was at a 46-month low, and the output price component also softened to a 43-month low. The 8-month low composite PMI of 48.9 was down from 51.0 in August and a one-year high of 52.2 in May. Domestic and foreign demand shrunk notably. Manufacturing and services were at a 9-month low of 44.8 and a 7-month low of 50.5.

Among Euroland’s two largest economies, the French PMI figures suffered withdrawal symptoms after the Olympics ended. Weakness was concentrated in services, which slumped from 55.0 in August to and 8-month low of 48.3. Manufacturing edged just 0.1 point above August’s 7-month low of 43.9. The composite index swung from 53.1 in August to 47.4 in September, that is from a comfortable rate of expansion back into clearly contractionary territory. The German composite PMI sank to a 7-month low of 47.2, with manufacturing (40.3) some two point lower than predicted and services (a 6-month low of 50.6) barely treading water.

Inflation reports today showed further retreat. In Lebanon, CPI inflation fell to a 53-month low of 35.0%, down from 51.6% in May and 268% at peak in April 2023. Consumer price inflation in India, edged just marginally above July’s 5-year low of 3.6% in July to 3.65% in August, less than half the peak of 7.8% touched in April 2022. Although consumer prices in Singapore rose 0.7% on month in August, the 12-month rate of inflation there dropped to a 40-month low of 2.2%. Malaysian CPI inflation of 1.9% last month was also below analyst expectations and at a 4-month low.

Estimated Dutch GDP growth in the second quarter of 2024 was left unrevised at a quarterly rise of 1.0% and a year-on-year advance of 0.8%. That was the first positive year-on-year change since the first quarter of 2023. The Dutch current account surplus in 2Q of EUR 28.2 billion was nearly identical to the prior quarter’s EUR 28.1 billion and 16% wider than a year earlier.

Business confidence in Denmark improved to a 29-month high in September.

Overnight price movements in Bitcoin, oil and gold have been limited.

Ten-year sovereign debt yields are down four basis points in Germany, three bps in Spain and two bps in France.

Tags: Preliminary purchasing manager survey results

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on Monday, September 23rd, 2024 at 6:00 am and is filed under New Overnight Developments Abroad – Daily Update.
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