ECONOMICS COMMENTARY — May 26, 2023
Week Ahead Economic Preview: Week of 29 May 2023
The following is an extract from S&P Global Market Intelligence's latest Week Ahead Economic Preview. For the full report, please click on the 'Download Full Report' link.
May manufacturing PMI, US payrolls and eurozone inflation
Worldwide manufacturing PMI data will be keenly watched in the coming week alongside the May US labour market report. Other noteworthy release in the coming week includes inflation numbers from the eurozone and South Korea while GDP figures will be released across Canada, France, India and South Korea.
Political concerns remain front and centre for the market with US debt-ceiling woes even as recent flash PMI data signalled that the developed world growth took place at the fastest rate in 11 months during May (see special report). While developments on the US debt-ceiling front is expected to continue dominating headlines in the short-term, the longer-term focus sticks with economic fundamentals as we track the latest updates in the goods producing sector with the slew of manufacturing PMIs next week, and the services and composite figures due the following Monday, on June 5th.
Of special interests from the May manufacturing PMI surveys will be the extent to which demand for goods waned in emerging economies through studying the PMI New Orders and New Export Orders sub-indices. This comes after data from major developed economies revealed sustained divergences between goods and services new business, with the former falling at the fastest rate since February among the G4 economies. Historically, divergences between manufacturing and services activity always fade eventually, hence it will be the demand component we will closely track for first signs of realignment.
May US non-farm payrolls will also be highly anticipated next week. While there are some expectations that the US Federal Reserve may be preoccupied with US debt-ceiling risks going into the June meeting, recent improvements in US economic conditions, as seen via the S&P Global Flash US Composite PMI, and still elevated inflation may keep the Fed on a tightening bias in their mid-year meeting. It will therefore be of importance to watch if the labour market data adds to this recipe for further interest rate hikes by the US central bank.
Eurozone price inflation
Official flash eurozone inflation data will be released after PMI figures revealed that price pressures further eased in May, though still elevated by historical standards. Softer inflationary pressures were accounted for by falling factory gate prices while charges for services climbed at a faster rate midway into Q2, altogether reflecting the persistent divergence in sector performance.
With overall growth accelerating in the second quarter according to PMI indications and inflation staying elevated, the concern is that the ECB may continue to act, further aggravating the imbalance on hand. Eurozone CPI will be released alongside final PMI numbers next Thursday, 1st June.
Key diary events
Monday 29 May
US, UK, Germany, Switzerland, Norway Market Holiday
Hong Kong Trade (Apr)
Tuesday 30 May
Japan Unemployment Rate (Apr)
Japan Jobs-to-application Ratio (Apr)
Australia Building Approvals (Apr)
Thailand Industrial Production (Apr)
Switzerland GDP (Q1)
Eurozone Consumer Confidence (May)
United States House Price Index (Apr)
United States Consumer Confidence (May)
Wednesday 31 May
South Korea Industrial Production (Apr)
South Korea Retail Sales (Apr)
Japan Retail Sales (Apr)
Japan Industrial Production (Apr)
Japan Consumer Confidence (May)
China (Mainland) NBS PMI (May)
France GDP (Q1, final)
Thailand BOT Interest Rate Decision
Thailand Current Account (Apr)
Germany Inflation (May, prelim)
India GDP (Fiscal Q3)
Canada GDP (Q1)
United States JOLTs Job Openings (Apr)
United States Fed Beige Book
Thursday 1 Jun
Indonesia Market Holiday
Worldwide Manufacturing PMIs, incl. global PMI* (May)
South Korea Trade (May)
Australia Capital Expenditure (Q1)
Australia Retail Sales (Apr)
Germany Retail Sales (Apr)
United Kingdom Mortgage Lending and Approvals (Apr)
Eurozone Unemployment Rate (Apr)
Eurozone Inflation (Apr)
United States ADP Employment Change (May)
United States ISM Manufacturing PMI (May)
United Kingdom Nationwide Housing Prices (May)
Friday 2 Jun
Singapore, Indonesia Market Holiday
South Korea GDP (Q1)
South Korea Inflation (May)
Australia Home Loans (Apr)
Singapore Retail Sales (Apr)
United States Non-farm Payrolls, Average Earnings, Unemployment Rate (May)
* Press releases of indices produced by S&P Global and relevant sponsors can be found here.
What to watch
Worldwide manufacturing PMI release for May
Following the flash PMI releases, worldwide manufacturing PMI data will be released next Thursday to provide a comprehensive picture on economic conditions within the goods producing sector.
Flash PMI data for major developed economies revealed that growth remained skewed heavily towards the service sector (see special report), and it will be of interest to observe if this phenomenon remains widespread across the globe. Demand weakness within the manufacturing sector also remained a lingering concern which led to further abating of price pressures within the manufacturing sector. Whether such a trend persists on a global scale will be scrutinised with the series of manufacturing PMI data releases.
Americas: US labour market report, Canada Q1 GDP
Key US data due next week include the May non-farm payrolls, unemployment rate and average hourly earnings figures, in addition to PMI readings. Consensus expectations currently point to a 180k addition to non-farm payrolls, unemployment rate to tick up slightly to 3.5% and average hourly earnings growth to slow marginally to 0.4% month-on-month. S&P Global Flash US Composite PMI revealed solid improvements in employment levels in May, backing the abovementioned consensus expectation for a still-solid US labour market in May.
Europe: Eurozone inflation, employment figures, France Q1 GDP
Besides the PMI figures, May flash inflation data from the eurozone will be eagerly awaited next Thursday for the latest indications on price developments in the euro area. According to the HCOB Flash Eurozone PMI, average prices charged for goods and services rose at the slowest rate for 25 months in May. Official data will be watched for similar developments given the strong correlations between PMI selling prices and eurozone CPI.
Asia-Pacific: Bank of Thailand meeting, India GDP, South Korea inflation and growth
In APAC, the Bank of Thailand meets with the possibility of a 25 basis points (bps) hike on the table according to consensus. Several tier-1 data will also be released in the region over the week.
Special reports
Flash PMI Data Signal Fastest Developed World Growth for 11 Months Price Pressures Rise Further - Chris Williamson
Thailand's Economy Rebounds in Early 2023 as Tourism Surges - Rajiv Biswas
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Purchasing Managers' Index™ (PMI®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
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