Market Movers
We are surprised by the resilience in developed markets' industrial activity indicators in September. The German Ifo expectations index increased, the flash Euro area manufacturing PMI declined less than expected and the flash US manufacturing PMI was unchanged. This would all suggest that the downside to the ISM manufacturing survey is limited but the regional PMIs from the US have been weak on balance and the latest advance trade data for August showed a steep decline in exports suggesting that the strong USD continues to be a drag on the manufacturing sector. Further, the inventory build-up in the first half of the year is likely to be a headwind to manufacturing production in the short term and the new orders-inventory differential in August strongly suggests a decline in the ISM this month. We estimate that the manufacturing ISM remained in expansionary territory (above 50) but look for a decline to 50.6 from 51.1.
US initial jobless claims are worth keeping an eye on as they will give us an indication of labour market health going into October.
Italian and Spanish manufacturing PMIs are expected to have declined in September. In Italy, the PMI reached a high level and should continue to point to stronger economic activity despite a potential decline in September. For Spain a decline in the manufacturing PMI would be the fourth in a row but the domestic driven services PMI remains at a high level in line with the strong GDP growth.
The Norwegian PMI could provide clues on when activity will start stabilising. We think September is too early for a turning point. See Scandi markets, page 2.
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