• UK Services PMI likely to dive into contraction
  • US Durable Goods set to show factories under pressure but orders still growing
  • Downward trend in Eurozone Economic Sentiment may spook markets

The week starts with a slew of early release Flash PMI numbers from both sides of the Atlantic for November. Manufacturing PMI for both the Eurozone and the UK are expected to slow a little but still come in comfortably ahead of the break-even 50 mark at 53.6 and 52.4 respectively. The picture for Services PMI however looks somewhat more downbeat, with the Eurozone print tipped to slide from 46.9 to 43.7, whilst the sector in the UK is expected to signal contraction as it falls from 51.4. A number comfortably below 50 is anticipated but if that’s heading for the low 40’s then any hopes of a quick rebound from the first COVID lockdown will be squarely put away, markets will likely baulk at the news and the idea that a rather bleak winter lies ahead will be reinforced.

Monday afternoon sees the same metrics from the US and whilst the picture is set to be a little more upbeat, the pace of growth is set to slow. Services PMI for November is expected to slide to 55.1, whilst the Manufacturing PMI number is forecast to come in around the 53 level.

Tuesday sees some forward looking data from Germany with the Ifo Expectations number for November. Again this is expected to soften slight from the 95 seen in October to 94, although that can be of little surprise given the impact the health pandemic continues to have both on the country itself and its major trading partners.

US Consumer Confidence for November will be published by the Conference Board and could offer some cause for concern. At the start of the year this number was around 130, before slumping in April to 85.7. The last two months managed a break back above 100 – that’s the baseline level from 1985 – but expectations are that the reading will slip into the 90’s once again. With political and economic uncertainty gripping the world’s largest economy as it continues to struggle to get a grip on COVID, such an outcome can however be of little surprise.

Sticking with the USA, Durable Goods Orders for October are set for release on Wednesday. This is a backward-looking indicator but even so, the immediate post-COVID bounce seems to be running out of momentum. There’s an expectation that the number will just scrape into positive territory, but the month-on-month trend is set to remain negative.

US Personal Spending and Income readings for October are also out and will provide another dimension on the state of consumption. Marked declines are expected from the September prints, but with spending continuing to outpace, that may be used to suggest there’s some confidence over the medium term.

Markets could be subdued today with the US celebrating Thanksgiving and that has also resulted in a number of data releases being brought forward, but German GfK Consumer Confidence data for December is slated for publication. The picture elsewhere in the Eurozone may be somewhat bleak, but expectations here are for a modest uptick. The November print of -3 is forecast to improve to -2, although that would still be the eighth successive negative reading.

Keeping with the Eurozone, the week will be rounded out with Economic Sentiment data for November. Again it seems as if Germany remains the outlier here in terms of confidence, with expectations being that the reading will be around the 87 level, below the 90.9 recorded in October. That’s still well above the lows from April, but the downward trend will be cause for concern as the currency block continues to fight against slipping into deflationary territory. 

Article by Tony Cross of Monk Communications. This article first appeared in Octo
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