- US labour market softens as NFP sees 75k employment gain
- More weak German data
- PMI composites slide again
US – is the weak NFP cause for concern?
Markets were in some kind of disbelief on Wednesday after the ADP report showed the weakest employment gain since March 2010 but despite good looking ISM non-manufacturing, the official NFP report confirmed softening on the US labour market in May. Worth noticing is the fact that it’s the second subpar employment increase in 4 months and despite a giant employment growth in January this year’s average (164k) is already quite well below 2018 (223k). That would not be a cause for major concern itself – indeed NFP data was volatile in 2005 and 2006 and turned negative well ahead of the Lehman Brothers collapse in 2008 but this was the strength of the US economy amid generally unfavorable circumstances: slowing business activity, fading effects of tax cuts and trade uncertainty. For sure, this reading takes us a step closer to the interest rate cut.
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US labour market has softened but remains within a range typical for expansion. Source: Macrobond, XTB Research
Europe – weaker data for Germany
Mario Draghi said during his post-meeting conference that the broad European economy is doing quite well and the question is for how long this could be the case given the weakness in the manufacturing sector. Well, so far this weakness persists: German industrial output and trade figures for April were way below the consensus. What is more, another drop in exports could be a sign that global demand remains soft.
Asia – PMIs on the downward path
The data from Asia this week was second tier so there are no big changes. Among the PMIs for May there were actually some positive surprises (India for instance) but overall trend remains unfavorable as highlighted by weak manufacturing PMI in South Korea and a slide in the Chinese PMI for services sector.
US ISMs ticked up due to the non-manufacturing sector but global and global ex US PMI composites slid once again in May. Source: Macrobond, XTB Research
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