25 July 2023
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DM PMI surveys indicative of a slowing global economy

By Daniel Richards

Preliminary PMI surveys for a number of advanced economies were released yesterday which, while appearing to confirm that economic growth was slowing, were nevertheless probably not so bad that they would deter central banks from staying the course on their monetary tightening in upcoming meetings. In the US, the composite survey was at 52.0 in July, down from 53.0 in June and missing predictions of the same. The drag came from services as the manufacturing PMI, while still contractionary at 49.0, was up on June’s 46.3 and beat consensus of 46.2. Services was still positive, but fell to 52.4, down from 54.4.  

The HCOB composite Eurozone PMI survey fell to 48.9 in July on the preliminary reading, down from 49.9 the previous month. This was the weakest reading since November and was lower than the consensus prediction of 49.6, as both the services and the manufacturing components of the survey were weaker than expected. Services remained positive but fell to 51.1, from 52.0 in June, while manufacturing fell deeper into contractionary territory at 42.7, down from 43.4 in June and weaker than the predicted 43.5. Of the bloc’s two largest economies, both France and Germany looked somewhat anaemic with the composite indices both down on June’s and both missing consensus predictions. In France, the contraction in services that began in June deepened this month, and while Germany’s services component remained expansionary, its manufacturing was especially weak at just 38.8. With new orders declining in both services and manufacturing for the Eurozone, the outlook over the third quarter will be challenging.

In the UK, the composite S&P Global PMI also disappointed as it fell to 50.7, down from 52.8 and missing the predicted 52.3. This was the weakest headline reading since January. Manufacturing fell deeper into contraction at 45.0, while services weakened to 51.5, down from 53.7 in June. Positively for the Bank of England, the survey showed that inflationary pressures eased, with manufacturing prices falling while the pace of services price rises slowed. Nevertheless, higher interest rates are still anticipated to weigh on growth and the EY Item Club forecasts released yesterday see GDP growth at just 0.8% next year, a downgrade from the 1.9% growth rate forecast back in April.

There were positive signals from China around a Politburo meeting held yesterday as officials pledged more support for the real estate sector, but fell short of any major stimulus programme that might boost headline Chinese and global growth significantly.

Dubai inflation slowed to 2.1% y/y in June, down from 3.0% in May. This marked the slowest pace of price growth since January 2022, just prior to the price shock in energy and food last year. Falling transport costs, down 13.9% y/y, fuelled the disinflation. Nevertheless, we anticipate that headline inflation will pick up through the close of the year as the oil price peak in mid-2022 passes through the base, and housing costs (the largest component of the basket) start to exert more upwards pressure. Housing was up 5.9% y/y in June, while household durables & maintenance was up 7.7% y/y, likely reflecting higher population growth-driven demand.

Today’s Economic Data and Events

  • 12:00 Germany IFO business climate, July. Forecast: 88.0
  • 18:00 US conference board consumer confidence, July. Forecast: 112.0

Fixed Income

  • US treasury yields rose on Monday with the 2yr UST increasing 8bps to 4.919% and the 10yr rising 4bps to 3.872%.
  • Longer dated European bond yields were generally lower on Monday. The 2yr UK Gilt yield rose marginally to reach 4.882%, while the 10yr yield declined 2bps to 4.242%. There were larger declines in the German Bund yields, on the back of disappointing Eurozone PMI data, with the 2yr yield falling 7bps to 3.006%, and the 10yr yield dropping 5bps to 2.413%.


  • Both Sterling and the Euro were weaker against USD on Monday, after PMI readings came in weaker than originally expected. GBPUSD fell 0.2% to reach 1.2829, and EURUSD declined 0.5% to 1.1064.
  • Commodity currencies gained against the dollar, with AUDUSD increasing 0.2% to reach 0.6739, and NZDUSD jumping 0.6% to 0.6205. USDCAD fell 0.42% to 1.3168.


  • Asian equity markets were mixed to start the week as the Hang Seng lost 2.1% and the Shanghai Composite closed down 0.1% as speculation mounted that any government economic stimulus in China would be disappointing. This morning, however, Chinese shares are gaining after more positive noises Monday evening.
  • On the other hand, Japan’s Nikkei closed up 1.2% while the Topix added 0.8% as the yen lost ground against its peers ahead of the big central bank meetings this week.
  • There was little concrete direction in European markets ahead of those crucial rate decisions, but the general tone was a lacklustre start to the week as PMI surveys highlighted economic weakness in the Eurozone and the UK. The composite STOXX 600 picked up later in the session to end up 0.1%, with the CAC down 0.1% and the DAX up 0.1%. The FTSE 100 also gained through the day for a 0.2% rise.
  • There was more positivity in the US as the NASDAQ, S&P 500, and the Dow Jones added 0.2%, 0.4%, and 0.5% respectively.
  • Locally, the DFM closed up 0.2% while the ADX added 1.2%.


  • Oil prices enjoyed strong gains to start the week as Brent futures rose 2.1% to USD 82.7/b while WTI gained 2.2% to USD 78.7/b.
  • The positive signals from China were the primary driver of the pick-up, and prices continue to gain ground this morning, rising to multi-month highs.

Written By

Daniel Richards Senior Economist

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