- US Q2 GDP beats, manufacturing PMI slows
- Downturn in Europe deepens
- GDP recovery in South Korea temporary
US – strong consumer a headache for the Fed
That’s not quite the data mix the Fed hoped to get just ahead of its pivotal July meeting. Slowing manufacturing (PMI down to 50) and trade (exports growth lowest in 3 years) show that the US is not immune to global headwinds. However, years of strong labour market make consumer resilient and this resiliency boosted Q2 GDP to 2.1% annualized – lower than in Q1 (3.1%) but still healthy and above expectations (1.8%). It might be too late for the Fed to withdraw the rate cut promise but president Powell might be cautious when it comes to promising more. Speaking of next week, do not forget that the Fed will be followed by the NFP report on Friday.
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US Q2 GDP was only about consumption – private and public. Investments and trade withdrew from growth. Source: Macrobond, XTB Research
Europe – downturn deeps
For Europe the week was mostly about the ECB but in the background we got the data proving that more action from the central bank is warranted. Flash PMIs from Germany and France point at a clear deterioration, especially in manufacturing, while the German Ifo index slid to the lowest level of the decade! From the EURUSD perspective flash inflation data (starting from Monday in Spain) published next week will be the most crucial, while investors will also watch preliminary Q2 GDP.
German manufacturing is already at the euro-crisis lows with the rest of the EMU “catching down”. Source: Macrobond, XTB Research
Asia – few signs of improvement
This week wasn’t particularly eventful in Asia as we had only 2 relevant data releases: inflation in Japan and Q2 GDP in SKorea. Japanese inflation remains low (0.9%) and that ensures the BoJ needs to stay accommodative (or even think of doing slightly more – the next meeting is on Tuesday). Korean GDP looked as a surprise at first but a 1.1% quarterly growth follows Q1 contraction of 0.4% and was to certain extent fueled by public spending while private investments remain weak. Next week will bring a series of PMIs and retail sales data in Australia so it will be much more interesting.
Investors remain pessimistic about that Korean stock market where the KOSP200 remains in a downtrend. Source: xStation5
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