- Japan manufacturing continues to remain in contraction (flash PMI)
- Germany services sector slows in August
- Eurozone composite PMI hits a 7-month high
- New Zealand dollar rises as RBNZ rules out steep rate cuts
- US flash manufacturing PMI soft in August
- US new home sales rises to a 9-year high
Today’s Economic events
- Japan flash manufacturing PMI 49.6 vs. 49.5
- BoJ Gov. Kuroda Speech
- Switzerland trade balance 2.93 billion vs. 3.79 billion
- French flash services PMI 52.0 vs. 50.6; flash manufacturing PMI 48.5 vs. 49.1
- Germany flash services PMI 53.3 vs. 54.3; flash manufacturing PMI 53.6 vs. 53.7
- Eurozone flash services PMI 53.1 vs. 53.0; flash manufacturing PMI 51.8 vs. 52.1
- US flash manufacturing PMI 52.1 vs. 53.1
- US new home sales 654k vs. 575k
- US Richmond manufacturing index -11 vs. 6
- Eurozone consumer confidence -9 vs. -8
- (NZD) Trade balance
Germany posts weakest services sector growth in 15 months
Germany’s economy was seen cooling down in August with flash PMI surveys from Markit for the manufacturing and services sector rising at a slower pace. Data released on Tuesday showed that the Markit flash manufacturing PMI fell to 53.6 in August, missing estimates of 53.7 and down from 53.8 in July. The flash services PMI was also weaker, as the index slipped to 53.3 in August, compared to 54.4 in July. Analysts were expecting to see the index print 54.3 in August. The flash composite output index dropped to 54.4 in August compared to 55.3 in July.
Markit said that new orders continued to rise steadily in August on the increase in new business to stronger demand from domestic and foreign markets. Manufacturers recorded the second sharpest rise in new export orders. With output and new orders rising, companies were also seen increasing the workforce numbers again in August with the rate of job creation staying well above its long-run average.
The slowdown in the sectors was seen as services PMI slowing to a 15-month low according to the PMI index. Factory PMI data was also weaker in August, falling to a 3-month low at 53.6 in August, compared to 53.8 in July.
Markit’s economist, Oliver Kolodseike said, “The long-standing theme of solid economic growth in Germany continued in August and based on the survey data available for the third quarter so far, we should expect further steady GDP growth.”
Kolodsike said that based on the PMI reading so far it was unlikely that Germany would be able to maintain the pace of 0.70% growth seen earlier this year. Tomorrow, the final GDP estimates for the second quarter will be released with analysts expecting to see a revised GDP growth rate of 0.30% in the second quarter, lower than the initial estimates of 0.40%.
Eurozone flash PMI rises to a 7-month high
Economic activity in the private sector continued to expand in August, data from Markit showed on Tuesday. The flash Eurozone Composite PMI output index rose to 53.3 marking a 7-month higher, following 53.2 in July. Services PMI activity was recorded at 53.1, up from 52.9 in July rising to a 3-month high. Manufacturing was, however, soft, falling to 51.8 or a 3-month low in August, after recording 52.0 in July.
The slowdown in the manufacturing order book growth and a dip in services optimism led to a weaker rate of hiring, Markit’s report showed. The data suggested that growth in the Eurozone could fade over the coming months with inflationary pressures being absent.
The August survey for the Eurozone showed growth in output accelerating marginally in both the manufacturing and services sector. Markit said that there were variations in the order books with manufacturing seeing slower demand while new businesses in the services sector rose at a faster pace. New orders received by factories increased at the slowest pace in one and half years.
Chris Williamson, Chief Business economist at IHS Markit, said “The August flash PMI indicates that the eurozone remains on a steady growth path in the third quarter, with no signs of the recovery being derailed by ‘Brexit’ uncertainty. The survey data is consistent with the region’s GDP growing at a quarterly rate of 0.30% in the third quarter, or 1.20% annualized, which is similar to that seen on average over the first half of the year.”
Markit: US manufacturing output remains solid
Flash manufacturing PMI in the US for August rose less than expected to 52.1, missing forecasts of 53.1. August flash PMI was also lower compared to July’s 52.9, data from Markit showed today. However, Markit said in its report that US production continued to outperform. While output continued to rise, total new work orders were seen rising at a slower pace keeping employment subdued to a four-month low. Companies reported near-stagnant price trends with input prices rising only marginally.
US manufacturers signaled increased output for the third month in August with the rate of expansion staying robust after edging slightly from July to a nine-month high.
Chris Williamson from Markit said, “The August drop in PMI is a disappointment but less worrying when looked at in the context of July’s better than expected reading. Taking the July and August readings together suggests that manufacturing is enjoying its best growth so far this year in the third quarter and should help drive stronger GDP growth.”
US new home sales posts solid growth in July
Sales of newly built homes in the US rose to the highest level in a decade in July, maintaining the strong momentum in the housing market. Data from the Commerce Department showed that purchases of new single-family homes rose 12.40% in July compared to a month ago to a seasonally adjusted annual range of 654k. This was the highest level since October 2007. The data beat analyst expectations of 575k.
On a year to date basis, new home sales have increased 12.40% compared to the same period a year ago. New home sales data for June were revised slightly lower from 592k to 582k or 1.70% from the previously reported 3.50%. Despite the solid data, many analysts were seen not very convinced as July’s increase was not seen to correspond with the housing starts. Last month’s increase in new home sales pushed well above the second quarter average with only residential construction seen as a minor drag on economic growth.