Tomorrow is going to be a major day for equity markets, because we get the Preliminary (or Flash) PMI readings for most of the world’s major economies.
The reason it’s so important is that this is the first time we get data collected during the “second phase” of the COVID-19 outbreak through Europe and the US.
The survey was carried out last week as different forms of quarantine and lockdowns were imposed across the western hemisphere.
We’ll be getting a look at what key corporate executives are thinking, and how they see this situation evolving over the next six months.
The Trends and Outlook
All through last year, the manufacturing component was suffering due to trade war concerns, and worries of a global economic slump.
Now, the expectation is to see a major impact on the services component. The measures being implemented to stop COVID-19 primarily affect services suppliers, such as restaurants, entertainment, hotels, and airlines.
As a measure of comparison, following the outbreak in China, Services PMI dropped to a never before seen low. The industrial component also dropped to a record low, but not as dramatically.
Caixin Services PMI fell from growth territory at 51.8 to 26.5. Current expectations for Europe are not for such a huge swing. However, it’s likely that PMI will disappoint on the downside.
What We Are Expecting
France
The first to report is France. Despite not being the largest component of the eurozone, France often sets the tone for the reports.
Forex traders might pay close attention to see by how far France misses expectations in order to calibrate their expectations for the rest of the day’s data.
The consensus among surveyed economists is that France’s PMI should come in at 52.5, compared to 52.6 prior. This would likely be the basis from which to compare the COVID-19 effect.
Projections are for manufacturing PMI to improve slightly but still remain technically in contraction at 49.8 compared to 49.1 prior.
Germany
This is likely to set the expectation for the eurozone’s impact from COVID-19. Expectations are for manufacturing PMI to move further into contraction at 48.0 compared to 49.4, reversing the improving trend.
Services PMI has remained largely positive despite a slowing economic outlook over the last several months. We can expect it to remain in expansion at 52.5, but a slight decline from 53.0 prior.
United Kingdom
UK manufacturing PMI has remained positive despite the concerns revolving around Brexit. But, under the threat of business closures, that might no longer be the case.
Projections are for Manufacturing PMI to come in still in expansion at 51.8. This is basically the same as 51.7 in February.
Projections are for services PMI to be the same as the prior month at 53.2. However, the impact from coronavirus on this figure might be slightly muted, given the UK government’s reluctance to implement lockdown until quite recently.
United States
US Services PMI had already dipped into contraction territory. We can expect to see this trend to deepen in the future. Current expectations are for Services PMI to register 47.4 compared to 49.4 prior, a modest drop considering the circumstances.
With factory stoppages potentially in the future, it wouldn’t be surprising if Manufacturing PMI slipped into contraction as well. However, the current consensus is for it to remain just barely in growth at 50.5 compared to 50.7 prior.
