Major World PMIs: Is Down the Only Way Forward?

Happy New Year! Welcome to an avalanche of data to get the markets started off with some volatility.

Generally, PMI data is instrumental in setting the tone for the markets during the first days of the month. It could be even more important as traders are coming back from the holidays to see where things are going.

China starts the data release session. Over the weekend, China reported that Evergrande’s sales had dropped by 99%. The company’s shares were suspended, as investors were reminded of the concerning state of the housing industry in the country.

Over the next few days, we will get monthly construction sales data. This could be vital to see if there are structural problems in the world’s second-largest economy.

What to expect from the data

Last Friday, we got the release of the “official” NBS Manufacturing and Non-Manufacturing PMI figures. Generally, manufacturing was broadly in line with expectations, just barely at break-even. Meanwhile, Non-Manufacturing PMI missed expectations, as the service sector dragged down the data.

Later tonight we get the private Caixin Manufacturing PMI figure. Analysts expect this to come in at exactly 50, virtually unchanged from the previous 49.9. That’s neither in expansion nor contraction and would be pretty much the same as the official version reported earlier.

Around the world

Next up just before the markets open we have UK Markit Manufacturing PMI. The expectation for this is to slip slightly to 57.6 from 58.1 in the prior measurement.

This is still comfortably in expansion, suggesting UK businesses have relative confidence in the economic outlook. A few decimals drop shouldn’t concern the markets, since it’s usual for purchasing managers to pull back a bit during the holidays.

Additionally, we should note that Brexit negotiator Frost suddenly announced his resignation right in the middle of the survey period. So, that bit of uncertainty might have had a slight negative impact on December’s PMI data.

Canada keeps on trucking

Canada could buck the general trend. That’s largely thanks to the higher prices of crude over the last month, and the expectations that prices will remain elevated at least in the short term.

Markit Manufacturing PMI may actually increase into expansion at 57.8 compared to 57.2 in November. That would mean Canadian businesses are among the most optimistic in the world.

However, their southern neighbor appears to be falling behind. The US has had some of the best PMI data during the recovery. But projections for December ISM Manufacturing PMI show a drop of almost a full point to 60.2 compared to 61.1 prior.

That would be a substantial reversal of the trend from the fall. Nonetheless, at that same time, analysts have consistently underestimated business optimism in the US.