- US PMIs down again, manufacturing in contraction
- Mixed data from Europe
- Korean trade war another risk on a global map
US – PMIs once again point to the south
We still wait for the ISM indices from the US for August but the PMIs that come out earlier are already offering blackening picture of the largest global economy. The manufacturing PMI slid below 50 for the first time during this decade and while non-manufacturing one is higher, it actually saw a larger deterioration of 2.1 points (to 50.9 points). Last week we wrote that the consumer side of the US economy remained relatively resilient but an observed deterioration in business sentiment contradicts statements from the US president that the US economy was “doing really well”.
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Markit PMI was first to signal a downturn in the US manufacturing and it was later confirmed by the ISM. Source: Macrobond, XTB Research
Europe – mixed feeling after the PMIs
The PMI indices in Europe provided a mixed picture. Headline readings were above expectations in both France and Germany. However, German manufacturing PMI remains at a recessionary level for the 6th month and the other surveys show that companies turn increasingly negative on future output. Therefore, higher headline numbers are not as positive as they seem.
DE30 was unable to move above 11850 and the macro data does not support a rally. Source: xStation5
Asia – Korean exports shows effects of another trade spat
While markets are focused on the US-China trade war another spat is taking place between Japan and South Korea and trade tensions seem to be affecting the Korean economy the hard way. After sinking by 11% y/y in July, Korean exports dropped by more than 13% in August according to the flash data. With China throwing a hardball at the US, the outlook for Asia remains grim and an unexpected jump in the Japanese services PMI does not change that outlook materially.
Korea is on track for a full blown recession. Source: Bloomberg, XTB Research
