After the cycle of major central banks this week, probably the last major data of the year is tomorrow’s release of preliminary PMI figures. Because of the holidays at the end of the month, many data points have been brought forward by a week. So, these figures could set the tone for the markets until we get the final figures at the start of the new year.
As traders try to parse whether there will be a global recession in the coming quarter, PMIs are a leading indicator that could provide clues. If results are below 50, it means that managers see their business contracting; above 50 means expansion. PMIs moving further into contraction are seen as a warning sign that a recession is building.
What to look out for
Australia:
Australia is one of the few countries that remain in expansion, but has been slowly slipping downward over time. Despite the reopening in China, Australian PMIs aren’t expected to change the trend. Flash December Manufacturing PMI is forecast to slide to 51.0 from 51.3 prior. Services PMI is expected to see a slight improvement to 48.0 compared to 47.6 prior.
France:
As the first major EU economy to report, often French figures set the tone for what to expect out of the shared economy. The trend here is expected to continue to slide further into contraction, although still not as bad as what normally happens in a recession. French Flash Manufacturing PMI is expected to tick lower to 48.2 compared to 48.3 prior. Services PMI is expected to tick down to 49.1 compared to 49.3 prior.
Germany:
The largest economy in Europe is expected to still underperform, given pressures associated with trying to drastically cut back on energy demand. However, Germany is expected to show a marginal improvement. Flash Manufacturing PMI is forecast to tick up to 46.3 from 46.2 prior, while Services PMI is expected to advance a little more to 46.3 from 46.1 prior.
Eurozone:
With Germany and France already reporting, this figure usually only affects the market if it’s significantly different from the trend set by the largest economies in the block. Flash Manufacturing PMI is expected to remain flat at 47.1, and so is Services PMI at 48.5.
UK:
Despite the proliferation of strikes across Britain, the UK is expected to still do better than Europe, but to slide further into contraction. Manufacturing PMI is expected to slip to 46.3 from 46.5 prior, while Services PMI is expected to tick down to 48.5 from 48.8 prior.
US:
The survey in the US is still ongoing, and since the Fed’s rate decision came in line with what was expected, it’s unlikely to impact the PMI results. US PMIs only recently fell into contraction, so now it’s a question of whether the slowing rate hikes could bring business optimism back. US Manufacturing PMI is expected to remain stable at 47.7, while services PMI is expected to improve to 46.8 from 46.2 prior.
