Archive

PMIs Persist Past Softening Seasonals

• The PMIs proved surprisingly resilient in the flash releases for July, especially in the US where its already high level pushed up further rather than converge down to its peers.
• Residual seasonality should be depressing the activity data, as appears to have occurred in the EA. Other US data softened, including the ISM, leaving the PMI as an outlier.
• Central banks seem set to conclude that policy is still tight amid broader softening signals. Indeed, we still expect the Fed to start a short rate-cutting cycle in September.

By Philip Rush

UK: Slow Slackening Progress for Pay

• The UK unemployment rate remained at 4.4% in May as the H1 increases are grinding to a halt in a similar pattern to 2023. Underlying changes are also becoming more neutral.
• Weekly vacancies data have rebounded to March levels while redundancies remain low and monthly pay growth is consistently annualising above 5%.
• The dovish BoE can welcome a renewed slowing in the headline wage growth rate despite current levels remaining inconsistent with the inflation target.

By Philip Rush

UK: GDP Fills In the H2 Hole

• Another surprisingly strong GDP growth rate in May has extended output’s above-trend rise to the point where the H1 excess broadly matches the shortfall from H2 2023.
• Returning to trend would require flat output through Q3, but other indicators suggest growth is only slowing, not stalling, so that may be too pessimistic.
• Activity data do not signal policy as overly tight, although unemployment suggests it is a little tight. Nonetheless, rate cuts remain likely as policymakers look elsewhere.

By Philip Rush

US Nonfarm Payroll Change 206k (consensus 190k) in Jun-24

- US Nonfarm Payroll additions for June 2024 exceeded expectations but reflected a slowdown compared to previous months, with private sector hiring displaying significant deceleration.
- Rising unemployment and modest wage growth compound evidence of a weakening labour market, encouraging a Fed rate cut soon.