UK PMI services finalized at 47.1, worst phase of downturn has passed

    UK PMI Services was finalized at 47.1 in June, sharply higher from May’s 29.0. PMI Composite rose to 47.7, also sharply higher from May’s 30.0, hitting a four-month high.

    Tim Moore, Economics Director at IHS Markit:

    “June data highlights that the worst phase of the service sector downturn has passed as more businesses start to reopen and adapt their operations to meet social distancing requirements. The proportion of service providers reporting a drop in business activity has progressively eased after reaching a peak of 79% in April. Around 33% of the survey panel signalled a reduction in business activity during June, which compared with 54% in May.

    “Encouragingly, more than one-in-four service providers reported an expansion of new business during June, which was commonly attributed to pent up demand and the phased restart of the UK economy. However, lockdown measures continued to hold back travel and leisure, while companies across all main categories of service activity commented on subdued underlying business and consumer spending in the wake of the COVID-19 pandemic.

    “The latest UK Services PMI data highlighted another steep decline in employment numbers, despite a rebound in business expectations for the year ahead. Service providers widely commented on fears of a slow recovery in customer demand and an immediate need to reduce overheads. Moreover, survey respondents often noted the high cost of adapting operations during the COVID-19 pandemic, coupled with constrained business capacity and difficulties passing on rising expenses to clients.”

    Full release here.

    Eurozone PMI services finalized at 48.3, improvement in sentiment adds to hopes of Q3 growth

      Eurozone PMI Services was finalized at 48.3 in June, up from May’s 30.5. PMI Composite was finalized at 48.5, up from May’ 31.9. Among some member states France PMI composite rose to 51.7, Spain rose to 49.7, Italy rose to 47.6, Germany rose to 47.0, Ireland rose to 44.3. All were 4-month highs.

      Chris Williamson, Chief Business Economist at IHS Markit said:

      “The headline eurozone PMI surged some 17 points in June, a rise beaten over the survey’s 22-year history only by the 18-point gain seen in May. The upturn signals a remarkably swift turnaround in the eurozone economy’s plight amid the COVID-19 pandemic. Having sunk to an unprecedented low in April amid widespread business closures to fight the virus outbreak, the PMI has risen to a level indicative of GDP contracting at a quarterly rate of just 0.2%, suggestive of strong monthly GDP gains in both May and June. An improvement in business sentiment meanwhile adds to hopes that GDP growth will resume in the third quarter.

      “However, despite the vigour of the return to work following COVID-19 business closures, we remain cautious as to the strength of any longer-term recovery after the immediate rebound. Companies continued to report weak underlying demand in June. Many remained risk averse, being reticent to commit to spending and hiring due to persistent uncertainty as to the economic outlook, and in particular the likely sustained weakness of demand for many goods and services due to the need to retain many social distancing measures. While confidence in the future has improved, it remains well below levels seen at the start of the year, reflecting how many businesses are far from back to normal.”

      Full release here.

      China Caixin PMI services rose to 58.4, employment remained the key problem

        China Caixin PMI Services jumped to 58.4 in June, up from 55.0, beat expectation of 53.8. The rate of expectation was the quickest recorded since April 2010. The upturn was widely attributed to the recent easing of conronavirus related restrictions and stronger demand conditions. PMI Composite rose to 55.7, up from 54.5, strongest since November 2010.

        Wang Zhe, Senior Economist at Caixin Insight Group said: “Employment remained the key problem. Multiple data showed that work resumption rates at manufacturing and service companies continued rising in June, but it still takes time for the economy to fully recover.

        “Therefore, although businesses were optimistic about the economic outlook, they remained cautious about increasing hiring, with employment in both the manufacturing and services sectors shrinking. Addressing the employment problem requires not only macro policies to further promote work resumption, but also more targeted relief measures introduced by governments to tide companies over.”

        Full release here.

        UK Gfk consumer confidence rose to -27, remains fragile and volatile

          UK Gfk Consumer Confidence rose to -27 in July’s flash reading, up from June’s -30. General Economic Situation over the next 12 months also improved to -42, up from -48.

          “After the recent near-historic low of -36 for the Consumer Confidence Barometer last month, we’re seeing some early signs of improvement across most measures for our fourth COVID-19 flash, even though all our core scores remain negative… Economic headwinds could easily blow any recovery off-course with confidence remaining fragile and volatile amid few signs of stability.”.

          Full release here.

          Australia retail sales rose 16.9% in May on lockdown easing

            Australia retail sales rose 16.9% mom in May, revised up from preliminary reading of 16.3% mom. But that’s not enough to recovery the -17.7% mom decline back in April.

            “The gradual easing of social distancing regulations, and the re-opening of physical stores, bolstered retail trade in May,” said Ben James, Director of Quarterly Economy Wide Surveys. “Retailers across a range of industries reported high numbers of consumers returning to stores, with some retailers noting levels similar to those seen in December.”

            Full release here.

            Australia AiG construction rose to 35.5, slower pace of contraction

              Australia AiG Performance of Construction Index rose to 35.5 in June, up from 24.9. The data indicates improvement in business conditions in the sector, with pace of contracted eased from the record lows experienced since March. In trend terms, all components improved but stayed below 50. IN particular, activity rose 13.7 pts to 35.1. New orders rose 9.8 pts to 32.8. Employment rose 11.3 pts to 40.4.

              Full release here.

              US initial jobless claims dropped to 1427k, continuing claims down to 19.3m

                US initial jobless claims dropped -55k to 1427k in the week ending June 27, above expectation of 1350K. Four-week moving average of initial claims dropped -117.5k to 1504k.

                Continuing claims rose 59k to 19290k in the week ending June 20. Four-week moving average of continuing claims dropped -494.5k to 19854k.

                Full release here.

                 

                US NFP grew 4.8m, unemployment rate dropped to 11.1%

                  US non-farm payroll employment grew 4800k in June, well above expectation of 3000k. But it’s still -14.7m, or -0.6%, below the February level. May’s figure was revised up to 2699k. Unemployment rate dropped back to 11.1%, down from 13.3%, better than expectation of 12.2%. Labor force participation rate also rose 0.7% to 61.5%, even though it’s still -1.9% below February’s level. Average hourly earnings dropped -1.2% mom, worse than expectation of -0.6% mom.

                  Full release here.

                  Eurozone unemployment rate rose to 7.4%, better than expectations

                    Eurozone unemployment rate rose 0.1% to 7.4% in May, better than expectation of 7.7%. EU unemployment rate also rose 0.1% to 6.7%. 12.146m people were unemployed in Eurozone, 14.366m in EU.

                    Eurozone PPI came in at -0.6% mom, -5.0% yoy, in May. EU PPI was at -0.5% mom, -4.6% yoy.

                    Australia trade surplus widened to AUD 8.03B as imports and exports plunged

                      Australia exports of goods and services dropped -4% mom, or AUD -1604m, to AUD 35.74B in May. Imports dropped -6% mom, or AUD -1799m, to AUD 27.71B. Trade surplus rose 2% mom to AUD 8.03B, below expectation of AUD 9.0B.

                      The trade surplus is seen as remaining elevated and has some how been lifted by the impacts of the coronavirus pandemic. Though, the down trend in both imports and exports showed sluggish domestic and external demands.

                      Full release here.

                      Fed Bullard: A wave of substantial bankruptcies could feed into a financial crisis

                        St. Louis Fed President James Bullard warned that the risk of a financial crisis remains. He said “without more granular risk management on the part of the health policy, we could get a wave of substantial bankruptcies and could feed into a financial crisis,”

                        Hence, “it’s probably prudent to keep our lending facilities in place for now, even though its true that liquidity has improved dramatically in financial markets.” The idea to is to make sure that markets don’t freeze up entirely in the twists and turns of a crisis.

                        US oil inventories dropped -7.2m barrels, WTI back below 40

                          US commercial crude oil inventories dropped -7.2m barrels in the week ending June 26, much larger than expectation of -0.9m barrels decline. At 533.5m barrels, oil inventories are about 15% above the five year average for this time of year. Gasoline inventories rose 1.2m barrels. Distillate fuel inventories dropped -0.6m barrels. Propane/propylene inventories rose 3.3m barrels. Total commercial petroleum inventories rose 1.1m barrels.

                          WTI has little positive reaction to the sharp decline in inventories. XTI/USD dropped below 40 as a temporary top was formed at 40.41. Deeper decline might be seen back towards 36.87 support. In the bigger picture, recent rebound from March’s spike low appeared to have lost upside momentum, as seen in daily MACD, ahead of 42.05 key resistance. Break of 36.87 should confirm short term topping and bring deeper correction back to 34.36 support and possibly below.

                          US ISM manufacturing rose to 52.6, growth cycle returned

                            US ISM manufacturing index rose to 52.6 in June, up from 43.1, beat expectation of 49.0. The index returned to expansion region above 50 after three months of contraction. Also, the 9.5 pts rise was the largest since August 1980. Looking at some details, new orders rose 24.6 pts to 56.4. Production rose 24.1 pts to 57.3. Employment rose 10.0 pts to 42.1. Prices rose 10.5 pts to 51.3.

                            “As predicted, the growth cycle has returned after three straight months of COVID-19 disruptions. Demand, consumption and inputs are reaching parity and are positioned for a demand-driven expansion cycle as we enter the second half of the year, ” said Timothy Fiore, Chair of ISM Manufacturing Business Survey Committee:

                            Full release here.

                            US ADP jobs grew 2369k in Jun, May revised up to 3065k increase

                              US ADP employment report showed 2369k growth in private sector jobs in June, below expectation of 3000k. Nevertheless, May’s figure was revised sharply higher from -2760k loss to 3065k growth. By company size, small businesses added 937k jobs, medium businesses added 559k, large businesses added 873k. Goods-producing sector added 457k jobs while service-providing sector grew 1912k.

                              “Small business hiring picked up in the month of June,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “As the economy slowly continues to recover, we are seeing a significant rebound in industries that once experienced the greatest job losses. In fact, 70 percent of the jobs added this month were in the leisure and hospitality, trade and construction industries.”

                              Full release here.

                              BoE Haskel: Current monetary stance appropriate but risks are to the downside

                                BoE policymaker  Jonathan Haskel said in a speech that “current stand of monetary policy is appropriate”. But, “on balance risks are to the downside”. He added that a second wave of coronavirus pandemic would be a “statement about public health”. BoE’s job would be to “respond to the prospective economic consequences”, depending on factors including fiscal reactions and other countries situations.

                                He also noted “worryingly the indicators of rising unemployment are already revealing themselves with unemployment claims recorded to date enough to put us back to levels of unemployment not seen since the financial crisis. Furthermore there remains a great deal of uncertainty as to how many of the currently furloughed workers will be able to return to their jobs, which in large part will depend on our success as a nation managing and suppressing the virus, and the state of household finances and consumers’ appetite for resumption of discretionary economic activity.

                                Full speech here.

                                ECB Panetta: Eurozone has weathered coronavirus shock as well as expected

                                  ECB Executive Board member Fabio Panetta said “the euro area has so far weathered the consequences of the shock about as well as could be expected.” “Positive indications need to be taken with a pinch of salt, since the high levels of prevailing uncertainty make it difficult to rely on past regularities.”

                                  Separately, Vice President Luis de Guindos said the central bank is ready to adapt its policy to meet the needs of EU after the coronavirus pandemic. However, “the main antidote will not be monetary policy – which we will conduct, knowing that we are not omnipotent – but rather reforms and budgetary policy of single governments.” He added that the impact of the pandemic would have been more contained had EU been more integrated at economic and monetary levels.

                                  UK PMI manufacturing finalized at 50.1, marked turnaround but employment a concern

                                    UK PMI Manufacturing was finalized at 50.1 in June, up from May’s 40.7. The 9.4 pts month-on-month rise was the largest on record. But the headline reading indicates a stabilization only, not marked improvement. Also, employment fell for the fifth successive month.

                                    Rob Dobson, Director at IHS Markit: “June completed a marked turnaround in momentum in UK manufacturing… The planned loosening in COVID-19 restrictions on the 4th July should aid further gains in coming months. Although the trend in new export business remains weak, that should also strengthen as global lockdowns and transport constraints ease further.

                                    “The main focus is now shifting towards the labour market. Concerns are rising about the potential for marked job losses, especially once the phase out of government support schemes begins. The news on that footing is less positive, with June seeing a further reduction in staffing levels and, although easing sharply since April’s record, the rate of job loss remains among the steepest in the 29-year survey history. Economic conditions will need to improve markedly across the UK, or some support retained, if the labour market downturn is to avoid becoming more entrenched through the remainder of the year.”

                                    Full release here.

                                    Eurozone PMI manufacturing finalized at 47.4, strong initial recovery

                                      Eurozone PMI Manufacturing was finalized at 47.4 in June, up from May’s 39.4. The headline index remained in contraction below 50 for 17 successive months. Among the member states, France PMI Manufacturing hit 21-month high of 52.3. Ireland was the only other one above 50 at 51.0. Greece (49.4), Spain (49.0), Italy (47.5), Austria (46.5), the Netherlands (45.2) and Germany (45.2) all stayed below 50.

                                      Chris Williamson, Chief Business Economist at IHS Markit said: “The final PMI numbers for June add further to signs that the eurozone factories are seeing a strong initial recovery as the economy lifts from COVID-19 lockdowns. The rise in the June survey is indicative of output falling at an annual rate of just 2%. That compares with a near 30% rate of contraction seen at the height of the lockdowns in April. This remarkable turnaround implies very strong month-on-month gains in the official production numbers for the past two months. Expectations for the year ahead have also rebounded sharply as hopes grow that the economy will continue to find its feet again in the coming months.

                                      “However, even with these gains, production and sentiment remain below pre-pandemic peaks, and persistent weak demand combined with ongoing social distancing measures are likely to act as a drag on the recovery. The focus therefore now turns to whether gains seen in the past two months can be built on, or if momentum fades again after this initial rebound.”

                                      Full release here.

                                      China Caixin PMI manufacturing rose to 51.2, limited impact from recent coronavirus flare up

                                        China Caixin PMI Manufacturing rose to 51.2 in June, up from 50.7, beat expectation of 50.5. Markit said output expands again as sector continues to recover from the coronavirus crisis. Total new work increases for the first time since January, but external demand remains subdued.

                                        Wang Zhe, Senior Economist at Caixin Insight Group said: “Around mid-June, the epidemic flared back up in some parts of China, but its impact on the overall economy was limited. The gauge for future output expectations continued to rise in June, reflecting manufacturers’ confidence that there would be a further relaxation of epidemic controls and a normalization of economic activities.”

                                        Full release here.

                                        Japan PMI manufacturing finalized at 50.1, change of V-shape recovery slim

                                          Japan PMI Manufacturing was finalized at 50.1 in June, up from May’s 38.4. Markit noted that firms still operate full capacity due to slow-moving order books. Export demand declines as coronavirus disruptions linger on. But business confidence rebounds into positive territory.

                                          Joe Hayes, Economist at IHS Markit, said: “The chance of a V-shape recovery in the manufacturing sector appears slim at this stage, which opens up the possibility of a two-speed economy if the domestic-focused service sector shows more signs of activity.”

                                          Full release here.