There’s a long list of economic releases today, including revised numbers for an array of November purchasing managers’ indices in manufacturing. Some of the data will offer the first look at last month’s profile, such as today’s PMI update for Spain’s manufacturing sector. Ditto for US manufacturing in November via the ISM report. In addition, we’ll see the US sales figures for light vehicles in November.
Spain: Manufacturing PMI (0815 GMT): The macro trend has eased recently for Europe’s fourth-largest economy, but the overall profile remains encouraging. True, the quarterly GDP growth rate dipped to 0.8% in the third quarter – the first round of deceleration in several years. But yesterday’s update on consumer spending revealed that retail sales rose for the 15th month in a row in October, increasing 5.8% in real terms (before seasonal adjustment) on the year-earlier level. That’s the best pace since last December.
The strongest phase of Spain’s recovery after the Great Recession, however, has probably passed. Economists think that GDP growth will tick lower in this year’s fourth quarter: 0.7% (quarter over quarter), holding at that rate in 2016’s first three months before slipping to 0.6% in the second quarter, according to consensus forecasts compiled by FocusEconomics.
The immediate headwind is the general election that’s scheduled for December 20 – an election that political analysts say could dramatically alter the electoral landscape. As a result, there’s a greater level of uncertainty at the moment about the economic prospects for 2016. Perhaps that’s why business confidence in Spain continued to drift lower in November. A widely followed index published by the Ministry of Industry, Tourism and Trade dipped to its lowest level last month since February.
Today’s first look at the mood in Spain’s manufacturing sector in November will offer more context for evaluating the broad trend. Recent history shows that the formerly buoyant levels of sentiment in this corner have made a steady trek lower. The purchasing managers’ index in October slipped to 51.3, marking the narrowest edge over the neutral 50.0 mark in two years.
Spain’s economy trend overall will probably remain positive in the near-term future, but the pace of growth has pulled back, as today’s PMI report will likely reaffirm.
US: ISM Manufacturing Index (1500 GMT): The US manufacturing sector has been struggling for much of this year, but there are signs that a degree of stability is returning. The prospects for anything beyond modest growth, if that, are still shaky. But yesterday’s numbers from the Dallas Fed offer another encouraging sign that the downtrend may be set to rebound in 2016.
The headline number for the Texas Manufacturing Survey increased more than expected in November. Although the latest report still reflects contraction, there was a sharp move towards the neutral reading last month for the Dallas Fed’s regional benchmark.
Four of the five regional Fed manufacturing indices posted varying degrees of improvement last month – two benchmarks actually crawled back into positive territory, albeit just barely. Does this add up to a sign that US manufacturing activity overall is headed for recovery? Maybe, although economists think there’ll be minimal signs of progress in today’s November update of the ISM Manufacturing Index, a widely followed measure of national output.
Econoday.com’s consensus forecast sees the ISM data ticking up to 50.5 from October’s 50.1. But that’s a slight gain and it’s still close to the neutral 50.0 mark that separates growth from recession in this corner. Markit’s PMI data paints a moderately brighter picture of US manufacturing, although the flash data for November unexpectedly fell to a two-year low (revised PMI numbers due today at 1445 GMT are expected to match the preliminary estimate).
The bottom line: manufacturing appears to be stabilising, but robust growth is still nowhere in sight.
US: Motor Vehicle Sales (TBD): Manufacturing may be wobbly in the US, but you’d never know it by looking at consumer spending on autos this year. Sales for light vehicles rose 10% over the 12 months through October, according to numbers published by Motor Intelligence.
Today’s update for November, however, is on track to retreat slightly. Econoday.com’s consensus forecast sees total sales (domestic and imports) slipping to 18.1 million units (seasonally adjusted annual rate) for November. That’s down from 18.2mln the previous month, although if the forecast holds we’ll see sales above the 18mln mark for the third straight month.
Analysts note that some of the expected decline for November sales is due to the fact that there were two fewer selling days last month compared with November a year earlier. But short of a dramatically lower number than expected, today’s update isn’t going to dim the generally upbeat profile that’s been supporting the industry this year.
Next year could see stronger headwinds if the US Federal Reserve moves ahead with raising interest rates. A recent study by the New York Federal Reserve advised that higher rates would weigh on sales. That’s not particularly surprising. But even if sales are set to slow in 2016, economists think there’ll be few signs of cooling in today’s release.
Disclosure: Originally published at Saxo Bank TradingFloor.com