Analysts at ANZ suggest that markets will be keenly watching the PMI releases for US, euro area, Japan and China over the next few days in an environment, where there is near unanimity on the likelihood of a moderation in future global growth.
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“Together, these economies account for 48.5% of global GDP (IMF 2018, PPP estimate) and 51.8% of global exports (WEO, 2017). Results from business surveys over coming months will be important in helping form investor expectations around the pace of future activity.”
“Headline manufacturing PMIs for the above economies have disappointed this year (the US is an exception) albeit they are still comfortably above 50. As a result of the softer PMI prints the ANZ global lead index has been easing and is suggestive of a slowing in global industrial activity in H2 2018.”
“Adding to the uncertainty is the increased tension stemming from Washington’s trade policy and retaliatory tariffs from China and Europe. The export orders in the PMI surveys have trended lower over the last six months. In the case of China, it slipped below 50 (contractionary zone) in June-July and export volumes dipped in Q2.”
“Our ANZ world trade lead index suggests a further downward adjustment in trade flows. We are of the view that the peak in the fed funds will be around 2.75% next year.”
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