26 April 2021
8 mins clock icon

US manufacturing soars

The flash US manufacturing PMI went up to 60.6 in April, the highest reading since the series started in May 2007


By Emirates NBD Research

  • The flash US manufacturing PMI went up to 60.6 in April, the highest reading since the series started in May 2007 and followed 59.1 in March. The survey's measure of prices paid by manufacturers jumped to the highest level since July 2008, with the higher input prices attributed to "severe supplier shortages and marked rises in transportation fees”. As strong demand is pushing against supply constraints, manufacturers are increasingly struggling to source raw materials and other inputs. The higher input costs is one of many factors expected to drive inflation above the Federal Reserve's 2% inflation target this year, however Fed Chair Jerome Powell has expressed confidence that the supply chains will adapt and become more efficient, preventing a sustained rise in prices.
  • New US single-family home sales expanded 20.7% m/m to a seasonally adjusted annual rate of 1.02 million units in March, the highest since August 2006, according to a report from the US Commerce Department on Friday. This far exceeded market expectations of 886,000 units. The market for new homes in the US is benefiting from tight supply of previously owned homes, and the pandemic driving demand for bigger accommodations as millions of Americans continued to work and study from home. Sales soared 66.8% y/y in March, with the new house price rising 0.8% y/y to USD 330,800 that month.  There were 307,000 new homes on the market last month, unchanged from February, and about 74% of homes sold last month were either under construction or yet to be built.
  • The flash IHS Markit Manufacturing PMI reading for Germany edged down to 66.4 from its record high of 66.6 reached in March, beating market estimates of 65.8. The Services PMI fell to 50.1 from 51.5, as a result the German Composite PMI, which tracks the manufacturing and services sectors eased to 56.0 from a 37-month high of 57.3 in the previous month. The survey pointed that companies in Europe’s largest economy hired at the fastest pace since October 2018, with work backlogs at the highest level in 10 years. Input prices hit a 10-year high however companies passed their increased costs through higher output prices, suggesting that inflationary pressures could be building up. Separately, the Eurozone flash IHS Composite PMI rose to a nine-month high of 53.7 from March's 53.2, and the French flash IHS Composite PMI in April rose to 51.7 points from 50 in March.
  • The flash UK Composite Purchasing Managers' Index (PMI) rose to 60.0 in April from 56.4 in March, its highest reading since November 2013. The PMI for the services sector rose to 60.1 in April from 56.3 in March, the highest reading since August 2014, while the PMI for the manufacturing sector, which accounts for around 10% of the UK’s economic output, rose to its highest since 1994 at 60.7, up from 58.9 in March. Both services and manufacturing companies increased staffing this month in preparation of staffing needs as non-essential retailers in England reopened on April 12 along and further loosening of restrictions on May 17th. Both manufacturers and services companies reported rapid increases in input costs.
  • The European Central Bank (ECB) left monetary policy unchanged as expected last Thursday.  The ECB will discuss the pace of asset purchases at its June meeting, when it updates its economics projections. An ECB survey released on Friday showed professional forecasters expect the eurozone economy to grow by 4.2% this year, below a previous projection for 4.4%, but 2022 growth outlook was upgraded to 4.1% from 3.7% indicating that the eventual rebound could be steeper than earlier expected. Respondents see inflation this year at 1.6%,  above the 0.9% projected three months ago and also above the 1.5% forecast by ECB staff in March, however projections beyond 2021 were left unchanged with the 2025 forecast still at 1.7%, below the ECB's target of almost 2%, an indicator that the bank is on course to undershoot its target for well over a decade. 

Today’s Economic Data and Events

12:00 EU German IFO Business Climate Index (Apr) Forecast 97.8

16:30 US Core Durable Goods Orders (MoM) (Mar) Forecast 1.60%

Source: Bloomberg

Fixed income

  • Benchmark governments bonds showed a mixed performance last week as yields in US markets extended their declines while some European bond yields gained. Treasury markets will be watching the FOMC later this week where we expect no change in policy but some likely improvement in how the Fed talks about the US economy, particularly ahead of what should be a strong Q1 GDP report.
  • The belly of the UST curve led gains last week with yields on the 5yr falling 5bps to 0.7807%. On the short end of the curve yields pushed below 0.15% on the 2yr while 10yr yields saw most of their action in the early part of the week, falling from a weekly high of almost 1.64% to close at 1.5577%, down almost 5bps across the five days.
  • In Europe, German bonds bounced in response to the ECB’s policy hold at its latest meeting and 10yr bunds closed the week at -0.26%, virtually unchanged over the week. However, Italian and Spanish yields closed the week higher.
  • The drop in US yields failed to lift the fortunes of EM bonds last week as anxiety over global growth rises thanks to surging numbers of Covid-19 cases in many emerging markets, India in particular. Yields on 10yr Turkish government bonds added almost 57bps to close out at 17.8% while South African 10yr yields rose almost 13bps to 9.173%. Indian bonds themselves actually managed to rise over the week with yields on the 10yr down nearly 5bps to settle at 6.038%. Minutes from the last RBI meeting assuaged markets that the bank will remain committed to accommodative policy.
  • The Fed dominates central bank action this week but there will also be policy announcements from the Bank of Japan (Apr 27), Sweden (Apr 27) and Egypt (Apr 28).
  • Qatar Petroleum is reportedly looking to raise as much as USD 10bn in bonds later this quarter to finance an expansion of the North Field gas project.


  • The US dollar extended its decline for a third week running with the DXY index falling almost 0.8% to close the week at 90.832. The market will be looking to the Fed and corporate earnings for direction in the coming days. EURUSD rose steadily against the dollar over the week, adding almost 1% in its third weekly gain. The single currency closed just shy of the 1.21 level at the end of the week. USDJPY fell nearly 0.9% over the course of the week, closing at 107.88 after having pushed as low as 107.48 on Friday.
  • Sterling managed gains of around 0.3% against the dollar with most of the rise coming earlier in the week. GBPUSD closed the five day at 1.3875 after having hit more than 1.40 during the course of trading. In the commodity currency space, CAD, AUD and NZD all gained relative to the dollar with NZD the outperformer, adding 0.8% to close at 0.7199.


  • Despite clawing back some losses over the second half of the week, this was not sufficient to offset losses seen at the start of the period, and most major global equity indices closed lower than they did the previous Friday. Rising Covid-19 cases in some major economies such as Japan and India weighed on sentiment generally, and in those affected countries in particular.
  • These two markets saw their benchmark equity indices decline by more than most other markets last week, with Japan’s Nikkei losing -2.2% w/w and India’s Nifty -1.7%. Another notable loser last week was Turkey’s Borsa Istanbul 100 which declined by -4.5% w/w amidst worsening relations with the US, rising Covid-19 cases and a depreciating currency.
  • In the US, all three major benchmarks had a strong close on Friday, with the Dow Jones, the S&P 500 and the NASDAQ gaining 0.7%, 1.1% and 1.4% respectively. Nevertheless, this left them all in the red over the week by -0.5%, -0.1% and -0.3%.


  • Oil prices lost some ground last week, largely on concern that extended state and municipal lockdowns in India would tank oil demand in the third largest consuming nation. Brent futures fell 1% to settle at USD 66.11/b, WTI was off by 1.6% at USD 62.14/b while Murban futures fell more than 2% to close just under USD 64/b.
  • OPEC+ will set the tone this week with a joint technical committee starting the week followed by a ministerial meeting on April 28. Given that demand may wobble in the coming months on a pending slowdown in India’s economy, which is directly affecting the oil refining industry there, we would expect that OPEC+ would hold production targets for the rest of Q3 steady after increasing output by 2m b/d from May to June. However, the bloc has shown itself prone to surprise policymaking this year so we won’t rule out a decision in either direction that could roil markets.
  • Despite the drop in spot prices, time spreads at the front of the curve strengthened. WTI 1-2 month spreads moved back into backwardation while in Brent the same spread is now at just under USD 0.7/b.
  • US drillers pulled one rig out of service last week, taking the total to 343. Compared with the same time last year, the rig count is now actually higher—by 18 rigs—and if the pace of addition that we’ve seen for most of 2021 holds we would expect to see some large annual increases posted over the coming months.

Click here to download charts and tables






Written By


Emirates NBD Research Research Analyst

There was an error during your feedback!

Your feedback is valuable to us and will help us improve.

Emirates NBD Research

Related Articles

Subscribe to our newsletter and stay updated on the markets

There was an error during your newsletter subscription!

Please try again to stay updated with all the latest financial news and valuable insights.

Thank you for newsletter subscription!

To stay updated with all the latest financial news and valuable insights.