February PMI figures from key economies around the world will be released tomorrow, in what could be the major market event for the week. Since February PMI figures are still being calculated, it constitutes the freshed data on the state of the economy. And it can provide some insight into what to expect for major data releases, such as CPI and jobs numbers. All of that will feed into expectations for the future of rate cuts.
Last month’s data was particularly relevant because PMIs were generally better than expected. This helped ease fears that a global recession was imminent, and affirmed the soft landing narrative not just for the US, but other countries as well. Europe is still teetering on a recession, but the hope is that it will be a minor drop into negative growth for a short period before moving back into an upward trajectory. The prices paid component from last month also reassured the markets that inflationary pressures were coming down.
What to look out for in key countries
Australia
The flash composite PMI is expected to pop back into expansion at 50.1, up from 49.0 in January, thanks to an improvement in the services sector. With the RBA still in wait-and-see mode, and investors worried about the future of Chinese economic growth, the focus here will likely be on the prices paid component to see if inflation is easing enough to start pricing in rate cuts.
Japan
Manufacturing PMI might be the focus here, after the country surprised by falling into a technical recession, at least according to preliminary data. Investors will want to see if that period of negativity is over, so advances in the manufacturing PMI will likely be key. It’s expected to improve slightly to 48.4 from 48.0 in January, but staying below 50 means it will still be in contraction.
Germany
The largest economy in Europe showed signs of improvement in the first month of this quarter, helping allay fears that it would drag the Eurozone into a technical recession. It’s still seen in contraction, but improvements in the manufacturing sector have helped reassure investors. Analysts expect German manufacturing PMI to move up to 46.6 from 45.5 prior.
UK
The economic situation in the UK is complicated for the BOE, as the country fell into a technical recession last year, but still has super-hot inflation. Not only will investors be looking at the prices paid segment to see if inflationary pressures are abating, but the difference between services and manufacturing will likely be a focus as well. The BOE has been fretting that the services sector is still showing signs of overheating, so improvements in the Services PMI could lead to speculation of rates remaining higher, and dampen some spirits on the stock trading end. On the other hand, that could be beneficial to the pound. UK Manufacturing PMI is expected to remain in contraction at 47.3, but up from 47.0 prior. Meanwhile the Services segment is expected to advance further into expansion at 54.5 from 54.3 prior.
US
The relatively strong economic growth in the US means investors are not likely to be all that worried about signs of a recession in the upcoming data. In fact, last month’s reading was a new multi-mont high for PMI figures. Here the focus is likely to be on the prices paid segment, as that will provide insight into inflationary pressures. The recent hot CPI, followed by PPI suggesting that price pressures remain, has put a damper on expectations that the Fed will cut. If PMI prices are still high, it could lend further credence to the high for longer narrative. US February flash manufacturing PMI is expected to ease slightly to 50.3 from 50.7 prior.
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