Improved PMI numbers for many regions – weekly update 10 July

Improved PMI numbers for many regions – weekly update 10 July

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Ben Seager-Scott
Published: 10 Jul 2017 Updated: 13 Jun 2022

A look back over macroeconomic and market events for the week ending 7 July 2017. US Non-Farm Payrolls failed to spark much excitement, and global PMI readings pointed to underlying economic strength, except for the UK which reported some disappointing data. We have a fairly quiet schedule for the week ahead, with some mid-level economic data and Federal Reserve Chair Janet Yellen’s US Congressional Testimony to look out for.

US Non-farm payrolls and wage growth

US Non-farm payroll numbers came and went with little excitement. Although the headline number was a clear beat, coming in at 222,000 jobs added in June (compared to forecasts of 179,000 and coming after disappointment last time), markets have moved on to focus on wage growth. This is traditionally expected to rise as conditions get tighter, but has thus far failed to take off.

Wages were up 0.2% month on month (mom), an improvement on the 0.1% reading for May, but short of the 0.3% markets were looking for. Unemployment remained tight, but did increase by 0.1% to 4.4% and comes as the participation ratio also ticked up by 0.1% to 62.8%. There are other signs that the economy continues to do well, meaning the lack of wage growth and sustained inflation remain hot topics.

Improved PMI numbers for Europe and the US, but the UK disappointed

Purchasing Manager Index (PMI) readings for a number of regions generally pointed to ongoing sustained strength in the global economy, but the UK was a notable disappointment. Eurozone Manufacturing PMI was revised up to 57.4, the highest reading since 2011, whilst the US Manufacturing PMI reading from the Institute of Supply Management surged from 54.9 to 57.8 (55.2 was forecast), and Non-Manufacturing rose from 56.9 to 57.4 (56.5 expected). Even China saw its Manufacturing PMI from the private Caixin group rise back into expansion territory at 50.4 from 49.6 (49.5 was forecast).

Against this, the biggest disappointment was the UK, where the Manufacturing PMI dropped sharply and unexpectedly from 56.3 to 54.3 (an increase to 56.5 was expected), driven by slower output and new order growth. Input and output prices were also subdued, potentially marking a relaxation of some of the near-term inflationary pressures we've been discussing recently.

Other data were also disappointing for the UK. Construction PMI fell from 56.0 to 54.8 (55.0 expected), Services PMI slipped from 53.8 to 53.4 (53.5 was forecast), and Industrial Production for May contracted -0.2% year on year (yoy), better than the -0.8% in April, but disappointing forecasts for growth of 0.2%. Despite recent strength, there are a number of questions around the UK domestic economy – though it should be remembered that, in terms of investments in the UK stock market, the majority of revenues are actually derived from overseas.

Last week’s other events

  • Among Central banks, minutes from the US and Eurozone monetary policy meetings ended up being something of a non-event. The US Federal Open Market Committee minutes did highlight some discussion around when the balance sheet reduction would start, with some keen to get on with it – possibly as soon as this month – whilst others wanted to wait for more data. The market consensus remains for the September meeting to mark the starting point. In Europe, the minutes from the equivalent European Central Bank meeting suggested members were seeing reduced downside risks as the region’s economy showed signs of picking up, but wanted to avoid the messaging being seen as too hawkish – clearly not what ended up happening, as we covered last week.
  • Japan’s Tankan survey of large industrial businesses signalled improvement, with the second-quarter Large Manufacturer’s Index increasing from 12 to 17 (15 expected). Consumer Confidence was slightly lower at 43.3 (from 43.6).
  • Eurozone retail sales were unchanged at 2.6% yoy, defying forecasts for a moderation to 2.3%. The unemployment rate also held steady at 9.3% (though 9.2% was expected).

The markets

Equity markets were barely moved, whilst core sovereign bonds continued to sell off.


Markets were essentially flat, with major regions less than 1% moved on the week. Both the MSCI United Kingdom and Europe ex-UK indices returned 0.5%, whilst over in the US the S&P 500 returned 0.1%. In Japan, the Topix shed -0.3%. It was a similar story for Emerging Markets, as the MSCI Emerging Markets index returned -0.1%.


10-year German bund yields rose another 10 basis points (bps) to finish the week at 0.57%, with the equivalent US Treasury yields 7bps higher at 2.39%. In the UK, 10-year gilt yields were also higher, expanding another 5bps to finish at 1.31%.


It was a poor week for most commodities. Oil’s bounce didn’t last long, with Brent Crude slipping to US$46.71 per barrel by the end of the week. Gold was also notably weaker, falling to US$1,208.60 per ounce, and copper fell to US$2.64 per lb. Although we don’t normally cover agricultural commodities in this article, there have been some interesting price movements in parts of this market, with wheat surging 20% in the last couple of weeks.


Sterling gave back some recent gains against the US dollar and the euro, but strengthened against the generally weaker yen. Sterling closed Friday at US$1.29, €1.13 and ¥147.

The week ahead

It’s a relatively subdued week ahead, though some of the expected economic data could provide discussion points. On Wednesday, the UK reports May labour data, including Average Earnings (1.8% yoy expected from 2.1% previously) and Unemployment (no change forecast at 4.6%). Eurozone Industrial Production for May is released shortly afterwards, where markets expect a surge from 1.4% to 3.6% yoy. Friday brings a slew of US economic data including Retail Sales (0.1% mom from -0.3% expected), Inflation (1.7% yoy from 1.9% forecast) and Industrial Production. Away from the data, Fed Chairwoman Janet Yellen will also be giving her periodic testimony to Congress on Wednesday and Thursday, and the language, as always, will be closely watched. Elsewhere:

Monday: Most of the action at the start of the week comes before UK breakfast time, with Japan reporting Machine Orders shortly after midnight, then Chinese inflation (expected to be unchanged at 1.5%) a couple of hours later. In the afternoon, the US reports the Fed Labor Market Conditions index.

Tuesday: Very little to look out for on Tuesday, with only the US JOLTs job openings and Wholesale Inventories numbers of any note.

Wednesday: As well as UK employment and Eurozone industrial production figures, we also have the latest Japanese Tertiary Industry Index reading and Chinese Foreign Direct Investment to look out for, along with the latest US Crude Oil Stocks.

Thursday: Chinese trade data are reported in the early hours of the morning, and then in the afternoon US Producer Prices are released, along with Initial Jobless Claims and Natural Gas Stocks.

Friday: A busy end to the week. Only the Eurozone Balance of Trade numbers are noteworthy in the morning, but in the afternoon there is plenty of economic data from the US to digest. As well as the Retail Sales, Inflation and Industrial Production readings covered above, it will be interesting to see what the Core Inflation reading is, given the focus on the underlying state of the economy, and markets are expecting an unchanged reading of 1.7%. Business Inventories and the Michigan Consumer Sentiment Survey results will also provide a little more colour.


This article was previously published on Tilney prior to the launch of Evelyn Partners.