- Eurozone Composite PMI projected to inch up in December to highest for 2016
- The US consumer inflation rate is set to rise to two-year high for November
- Core CPI appears to be rising too; it could reach as high as 2.2%
- US Manufacturing PMI headed higher for the fourth month in a row for December
Another day, another busy stream of economic releases, including the preliminary numbers for the Eurozone Composite PMI. Later, two US numbers will be closely scrutinised for a fresh read on the macro trend: Consumer price inflation for November, followed by December’s flash data for the Manufacturing PMI.
Eurozone: Composite PMI (0900 GMT): Every time the euro-area economy has shown signs of stronger economic growth in recent years, the rebound stumbles soon after.
Is a replay unfolding in the wake of yesterday’s disappointing numbers for industrial output? Production dipped 0.1% in October, modestly below the crowd’s projection for a 0.2% monthly advance.
The year-on-year trend is still positive, but the latest downturn pared the annual change to a thin 0.6% increase – less than half the pace in the previous month.
The latest slide could be noise, of course. If it is, we may see encouraging data in today’s December flash estimate for the Eurozone Composite PMI, a GDP proxy for the euro area.
The consensus forecast calls for a slight uptick to 54.0 (comfortably in growth territory), according to TradingEconomics.com.
If the estimate holds, the trend for December will mark the strongest pace for 2016 and reaffirm that Eurozone GDP growth remains on track for a 0.4% quarterly gain in the fourth quarter, the most since Q1.
A big downside miss in today’s PMI report, on the other hand, would fuel speculation that the recent rebound for the Eurozone’s macro trend is stumbling once again.
US: Consumer Price Index (1330 GMT): The inflation trend continues to accelerate. Granted, it’s a mild upturn, and there’s still a long road ahead before pricing pressures resemble anything bordering on worrisome for the economy.
Nonetheless, it’s starting to look like prices are headed higher on a sustainable basis.
Yesterday’s wholesale inflation report for November suggested as much. Producer prices at the headline level rose 1.3% for the year through last month, the biggest gain in two years.
Today’s release for consumer inflation is expected to follow suit. The headline consumer price index is on track to tick up to a 1.7% year-on-year advance (also the strongest pace in more than two years), according to TradingEconomics.com’s consensus forecast.
Core CPI looks headed higher too, with the crowd calling for the pace to edge up to 2.2%, or close to the highest rate in four years.
The Treasury market has been forecasting modestly firmer pricing pressure in recent months, based on the yield spread for nominal less inflation-indexed yields.
The implied estimate via 10-year yields, for instance, was 1.97% in mid-day trading yesterday, or just a hair below the highest level in more than two years.
Today’s outlook for inflation's hard data appears likely to confirm what the Treasury market has been forecasting for several months: pricing pressure is gaining a foothold.
US: Manufacturing PMI (1445 GMT): The manufacturing sector is showing signs of recovery in the fourth quarter, and today’s flash PMI data for December is expected to reaffirm the trend.
The consensus view calls for the fourth straight monthly rise for the PMI, according to TradingEconomics.com.
Analysts are looking for a fractional rise to 54.2. Although that’s the smallest possible improvement, it’s enough to confirm that a brighter outlook for the sector is still a reasonable assumption for the new year.
“Both production and order books are growing at impressive rates, fuelled predominantly by rising domestic demand for goods from both consumers and businesses,” Markit’s chief business economist said earlier this month. “Companies are also rebuilding stock levels, suggesting the recent inventory drag is easing.”
Another benchmark - the ISM Manufacturing Index - has also turned sharply higher in recent months, providing additional support for arguing that the sector’s fortunes are turning for the better.
Although today’s update is expected to basically show that the PMI is holding steady at a moderate growth pace, the news will remind the market that a solid pace of growth has returned to manufacturing.
Disclosure: Originally published at Saxo Bank TradingFloor.com