purchasing managers’ index (PMI) are closely tracked by traders, because they can move the market. But given the current circumstances, after what several central banks said last week, Monday’s data release could get extra scrutiny. Markets have been trending lower for over a month due to concerns about economic growth amidst the trade wars. But after the avalanche of rate decisions over the last few days, it seems markets might have stabilized.
With risk appetite balancing around whether to resume the fall or push for a rebound, information on how economies are progressing the world could be a vital indicator. Typically, PMIs offer some advanced insight into what’s going on with the broader economy, because macro trends manifest with purchasing managers first. If they are putting in a lot of new orders, it means there is growing activity. If prices are rising, then it means there is good demand and supply needs to step up. But if purchasing managers’ index (PMI) are in contraction (that is, below 50), then the lack of spending could become a self-fulfilling prophecy that the economy will slow down.
Getting Production Going
Europe has been the centerpiece of PMIs lately, as its sluggish economy has kept industrial activity in the doldrums. But, recent geopolitical changes have seen a push to increase spending in the shared block, with Germany pledging up to €500 billion in defense and infrastructure as part of its debt brake reform. This has given a shot of adrenaline to the stock market. But Monday’s data will provide some insight to see if Europe’s commitment to more spending is having real world effects. It’s the first PMI survey since the announcement of tariffs affecting the EU, as well as after the German federal election.
The US is also in focus after a month and a half in which investors have become wary that the American economy won’t do as well as expected. Up until mid-February, the thought was that pro-business policies of the new Trump White House would allow the American economy to power through the tariff turbulence. But, the emphasis on cutting spending, slow roll out of regulation cuts, and stiff resistance from entrenched bureaucracy had left tariffs as the main impact on the US economy from the new Administration. If PMIs start to fall, it could be an indicator that the largest economy in the world could slow down in the coming months.
What to Look Out For
German flash March manufacturing purchasing managers’ index (PMI) is expected to fall further back into contraction to 46.0 from 46.5 prior. That would contribute to a composite measure of just 50.2, down from 50.4 prior. The lack of improved optimism despite all the increased spending could be a worrying sign for policymakers, and keep the ECB on an easing track.
Euro Area flash March manufacturing PMI is expected to also decline to 46.7 from 47.6 prior. The composite would straddle the 50.0 mark that separates expansion from contraction. The Euro has been gaining recently on the expected positive impact from the spending, and could retrace some of the move if the Euro area falls back into contraction.
The Anglo Moves
British manufacturing is expected to decline, but not by as much, with the March Manufacturing purchasing managers’ index (PMI) forecast at 46.7 compared to 46.8 prior. This would leave the composite level just slightly lower at 50.4 compared to 50.5 prior. The indication could be that the British economy is still remaining resilient, and might mean that the Spring Statement won’t need to have as much modification as some analysts worry.
The US manufacturing PMI (flash) for march is expected to see a strong slowdown to 51.0 from 52.7 prior. Analysts attribute this to the effect of tariffs. This would cause a large deceleration in the composite reading to just barely above expansion at 50.2 compared to 51.6 prior.