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Focus On Upcoming PMIs, With Data Surprises In Negative Territory For Major Economies

GLOBAL MACRO
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The upcoming preliminary PMI prints for the EU and US will present an important update in terms of the global macro backdrop. We had the preliminary Japan print earlier for July, which slipped back into contractionary territory, although it remains above recent lows.

  • The broader backdrop of global data outcomes has generally been to surprise on the downside, as per the Citi global economic surprise index. This index is plotted below against global IP growth in y/y terms.
  • All else equal the softness in global data outcomes is pointing to some downside risks. This is consistent with commodity price weakness as per the earlier bullet.
  • This reinforces the importance of the upcoming flash PMIs, as the Citi surprise index measure is close to trough points from recent years (excluding the 2020 Covid episode). Such surprise indices have also had a tendency to lead market growth expectations.

Fig 1: Citi Global EASI Versus Global IP Growth Y/Y

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The upcoming preliminary PMI prints for the EU and US will present an important update in terms of the global macro backdrop. We had the preliminary Japan print earlier for July, which slipped back into contractionary territory, although it remains above recent lows.

  • The broader backdrop of global data outcomes has generally been to surprise on the downside, as per the Citi global economic surprise index. This index is plotted below against global IP growth in y/y terms.
  • All else equal the softness in global data outcomes is pointing to some downside risks. This is consistent with commodity price weakness as per the earlier bullet.
  • This reinforces the importance of the upcoming flash PMIs, as the Citi surprise index measure is close to trough points from recent years (excluding the 2020 Covid episode). Such surprise indices have also had a tendency to lead market growth expectations.

Fig 1: Citi Global EASI Versus Global IP Growth Y/Y

Keep reading...Show less