EUROPEAN DATA WRAP: EZ & UK Manufacturing continues to crumble though the PMIs differ somewhat on inflation implications

Analysis details (15:00)

EZ Final Manufacturing PMI, July

• HCOB Manufacturing Final PMI 42.7 vs. Exp. 42.7 (Prev. 42.7)


• Unsurprisingly, the release confirms marked pressure for the manufacturing sector. HCOB writes that “It looks like the manufacturing recession is here to stay in the eurozone. Stronger declines in output, new orders and purchase volumes at the start of the third quarter back up our view that the economy as a whole is in for a bumpy ride in the second half of the year.” A view which adds to concern that the region could return to contraction in Q3 after the robust Q2 headline data release on Monday, though as a reminder the internals were less convincing – newsquawk wrap available here.


• On the pricing front, the release will be welcome by the ECB as HCOB’s survey showed the “deflation of output prices has picked up speed again, falling at the most rapid pace in almost 14 years”; though, pressures within the service sector remain a point of concern. For what it is worth, market pricing continues to imply a 25-30% chance of a 25bp hike in September.

UK Final Manufacturing PMI, July

• S&P Global/CIPS Manufacturing PMI Final 45.3 vs. Exp. 45.0 (Prev. 45.0)


• As with other regions, a continuation of the woes for the manufacturing sector are not a surprise. For the BoE, the release is somewhat mixed as it shows that prices are falling with cost pressures reduced as supply chains improve. However, for the month overall HCOB notes that July saw little movement in selling prices. Given the focus on services the manufacturing release is unlikely to be a determining factor for the BoE on Thursday, where a 25bp hike is likely though a three-way vote split could feasibly occur. On services, the final PMI is scheduled for release on the morning of the BoE and as such serves as an 11th hour indicator into the pricing situation for the UK economy’s main area. Though, the inflation assessment and ultimate tightening magnitude will be much more dependent on hard data and the MPCs own conversations with industry.

German Unemployment, July

• Unemployment Rate SA 5.6% vs. Exp. 5.7% (Prev. 5.7%); Change -4.0k vs. Exp. 20.0k (Prev. 28.0k); Unemployment Total NSA (Jul 2023) 2.617M vs. Exp. 2.6M (Prev. 2.55M)


• The number of those unemployed in Germany increased to 2.617M in July, an increase of 62k. While the data represents the first hard-data signal of pressure in the regions labour market it will be a welcome sign for those looking at inflation dynamics. As the larger unemployment figure should take some of the heat out of wage pressures. Though, it remains to be seen if it will have an impact soon enough to filter through to the blocs wage situation and by extension the ECB’s calculus. Though, as recently as the July ECB meeting President Lagarde said that while wage increases are certainly an inflationary factor second round effects are not currently being seen; an observation which perhaps limits the implications of the July data.

01 Aug 2023 - 15:00- Fixed IncomeData- Source: Newsquawk