The Weekly Macro Review for w/c 21 September 2020 – The prelim PMI’s for Sep indicated that the pace of the global rebound was similar compared to Aug growth. The broader Eurozone result was mixed though. Strong manufacturing growth in Europe was led by Germany which recorded accelerated export demand. Eurozone services shifted back to slight decline after no change in Aug. Output growth in the UK remained robust across services and manufacturing, slowing only slightly.
The Japanese PMI’s were also little changed from Aug, indicating a similar pace of decline in services and manufacturing output. The Japanese manufacturing PMI had already been weak throughout 2019. The output indexes indicated that most firms reported declines throughout 2020. There is some recent divergence with official industrial production data with Jul manufacturing increasing by +8.7% month on month.
US PMI’s for manufacturing and services output indicated a continued and steady pace of growth across firms in Sep. Services output growth was little changed and manufacturing output growth was slightly faster.
The US advance durable goods report for Aug was insightful. Monthly growth in orders and shipments slowed notably after two extremely strong months – and this likely reflects the restart of supply chains, especially for motor vehicle production. Excluding transportation, orders and shipments for industry were on par with a year ago in Aug.
Globally, motor vehicle production has been picking up speed over the last two months (pipeline fill) and this is one important indicator of the lift in global activity. In the US, motor vehicle orders and shipments declined slightly in Aug versus the prior month, but levels remain elevated and are still above those from a year ago. From here, the level of consumer demand will be important. The US manufacturing industry of most concern is non-defense aircraft. Orders have been negative for five of the last six months (representing approx. -$41bn in likely cancelled orders), leading to bigger falls in unfilled orders, shipments are -44% below a year ago, and inventory is +17% ahead of a year ago.
US initial jobless claims for the 19 Sep remain highly elevated and little changed from the prior week levels at 1.45m people (federal plus state programs). Continuing claims for both state and federal programs were notably lower for 5 Sep (than in the prior week) but remain elevated at 26m people.
There are more data releases covered in the review document. Use the links on the contents page to navigate to different country sections. Download the review here;
The macro outlook for w/c 28 September 2020 – Highlights this week will be US Fed speeches, the first US Presidential debate, and key data releases.
This week there are several US Fed Governors speaking. On Tue, Vice Chair Clarida will speak on Treasury Market Resilience and Vice Chair Quarles will speak on Financial Regulation and Financial Stability – https://www.federalreserve.gov/newsevents/calendar.htm. The ECB President Lagarde will also speak early this week.
US domestic politics will continue to feature. The first of three US Presidential debates between US President Trump and Democrat nominee Joe Biden will take place on 29 Sep this week. The next two debates will be held on 15 and 22 Oct. US President Trump has also announced his nomination for a Supreme Court Justice to replace Justice Ginsburg. The confirmation process is expected to be swift. There was also news late last week that US Treasury Secretary Mnuchin and House Speaker Pelosi would restart stimulus talks.
The key data points this week include: US non-farm payrolls and employment for Sep, the ISM manufacturing PMI for Sep, the PCE and price index data for Aug, and the final reading of consumer sentiment for Sep.
More broadly, the release of the global manufacturing PMI’s for Sep will commence this week, with services covered next week.
The next schedule for US Fed purchases of US Treasuries and MBS will be released on 28 Sep.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $474bn in ST Bills, TIPS, Notes, and Bonds this week raising approx. $103bn in new money. This week, approx. $40bn in Bills, Notes, and Bonds will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
