In the US, the Markit PMI manufacturing and services for June is due out. Manufacturing PMI has cooled off since it peaked at 55 in January. The current level of manufacturing PMI points to GDP growth around 1.6% and even though this does not sound impressive, we believe that this level is representative of the underlying economic strength. Thus, we do not look for any significant changes to the PMI manufacturing. We expect PMI services to have increased to 54.2 and continue to believe that the moderate growth will be driven primarily by the service sector.
Also in the US, Fed governors Bullard (non-voter, dove), Mester (non-voter, hawkish) and Powell (voter, neutral) are due to speak today.
In the euro area, PMI figures are due out. Manufacturing PMI rose from 56.7 in April to 57.0 in May while the service PMI declined from 56.4 in April to 56.3 in May, leaving composite PMI unchanged. Seemingly, the weak manufacturing PMIs observed in recent months in the US and China did not drag euro area PMIs down in May, but could still weigh on the June figures. We expect PMIs to remain somewhat unchanged in June, as activity in the euro area is still strong, although risks seem tilted to the downside. New orders are currently at a six-year high and the order-inventory balance, which is usually a good leading indicator, has started to diverge and could drag manufacturing PMI down in June. Additionally, the weakness in the external environment already mentioned could drag on export orders.
To read the entire report Please click on the pdf File Below: