After a week in which a dozen central banks around the world either tightened policy or resorted to currency intervention, the focus is now on the economy. Just how much of the move was priced in, and how much will economic growth be impacted going forward. So far, tightening has contributed to a stronger dollar, on top of increased risk avoidance supporting safe havens.
Purchasing managers are likely to see the first signs of the effects of monetary policy. Whether that’s in lower prices implying potentially less inflation in the future, or lower orders implying less growth in the future. Weaker PMIs could start raising bets that monetary policy will start to level off in the near future. The surveys are still being conducted, so we won’t see the full effect on manager’s thinking until next month. But central bank action was pretty well telegraphed ahead of the start of the survey.
What to look out for:
Australia is expected to keep bucking the global trend, with manufacturing PMIs expected to be firmly in expansion, although stumbling a bit. The services sector is expected to remain under pressure through the winter, and slower tourism activity. Australian Manufacturing PMI expected at 53.2 compared to 53.8 prior. Services PMI expected to expand modestly to 50.8 from 50.2 prior.
As usual, France is the first major EU country to report PMIs, and is likely to set the tone for the shared currency unless there is a major deviation with later data. The high cost of energy in France has been weighing on the economic outlook coupled with the ECB recently starting to raise rates. Both are likely to be on the minds of managers when they answer the survey.
French September Preliminary Manufacturing PMI is forecast to fall just barely into contraction at 49.8 compared to 50.4 prior. Services PMI is expected to remain just barely in expansion at 50.5 compared to 51.2 prior.
Recent positive news in Germany on the energy front isn’t expected to lift businesses’ spirits all that much. With energy prices still high despite the country well ahead of target on filling up its reserves, executives are worried about which plants will be idled next due to high operating costs.
German September Preliminary Manufacturing PMI is expected to fall further into contraction to 48.3 from 49.1 prior. Services PMI is expected to perform even worse, dropping to 46.0 from 46.9 prior.
The British survey was conducted after PM Truss announced the price cap, so we could see if that has any effect on business optimism. However, the details have yet to be announced, so the impact might be minimal. UK Preliminary Manufacturing PMI is expected to improve modestly to 47.5 from 47.3 prior. Services PMI is expected to fall to 50.0 compared to 50.9 prior.