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PMIs all lean positive

Edward Bell - Senior Director, Market Economics
Published Date: 24 May 2023


Germany’s economy showed further signs of resilience in May, according to preliminary PMI readings. The composite PMI number for Germany rose to 54.3, marginally higher than the 54.2 recorded a month earlier but beating market expectations for a slowdown. The gain was wholly down to an improvement in the services component where the PMI rose to 57.8, its strongest level since August 2021, and better than market expectations for 55. Manufacturing, however, remained weak with the PMI for the sector weakening to 42.9, representing 11 months in a row of contracting activity. Price pressures were higher in the services sector, reflecting overall healthy consumer demand. The composite PMI for France slipped to 51.4 from 52.4 a month earlier as the services sector showed signs of slowing down. The Eurozone-wide composite PMI ticked lower to 53.3, from 54.1 a month earlier, with both the manufacturing and services components declining.

The UK PMI for May dipped to 53.9 for the composite print, lower than the market expectation for 54.6. The services PMI fell to 55.1 from 55.9 a month earlier but still comfortably on the expansion side of the indicator. New business measured by the index also slowed, to 55.4 from more than 56 in April. Similar to conditions in the Eurozone, the manufacturing sector remained soft at 46.9 and representing 10 months in a row of contraction.

In the US, the services PMI for May rose to 55.1 from 53.6 a month earlier, suggesting consumption in the economy is still performing well despite pressures from inflation and high interest rates. The services outperformance helped to push the composite level higher, to 54.5 from 53.4, as manufacturing dipped to below 50, falling to 48.5 for the month. Business expectations also rose to one-year high while the shift in inflation from goods to services remains a worry. The PMI numbers provider another clue that the US may indeed avoid recession in 2023.

The UAE and Malaysia will start talks about forming an economic partnership, according to a statement from Malaysia’s trade minister. Bilateral trade between the two countries is estimated at USD 8.5bn for 2022.

Today’s Economic Data and Events

  • 10:00 UK CPI April y/y: forecast 8.2%
  • 12:00 SA CPI April y/y: forecast 7%
  • 12:00 GE IFO Business climate May: forecast 93.1
  • 11:00 US FOMC meeting minutes May 3

Fixed Income

  • The lack of progress on the debt ceiling talks in the US sent worries down US equity markets and helped to lift the very assets that may be defaulted upon, US Treasuries. Yields on the 2yr closed near unchanged at 4.316% while the 10yr yield fell 2bps to 3.6919%. Fed chair Jerome Powell met several Democratic party members overnight but reportedly did not discuss the debt ceiling issue with them.
  • Turkey’s Eurobonds strengthened overnight with yields down 13bps on the 10yr to 10.107%. Local currency markets underperformed, though, with yields adding 7bps to 8.85% ahead of a meeting of the CBRT later this week. The 5yr CDS dropped about 15bps overnight. Egypt’s 10yr Eurobond traded a little softer with yields up by 17bpsto 16.578%. The CDS traded higher, up by about 25bps.
  • MAF priced a USD 500m 10yr green sukuk at +140bps. There was reportedly more than USD 3bn of interest.
  • Saudi Fransi has priced a 5yr USD 900m sukuk at +105bps.


  • It was a dollar bid day overnight even as PMI indicators for all major economies flashed positively. EURUSD dropped by 0.4% to 1.077 while GBPUSD fell 0.2% to 1.2413. USDJPY helped essentially flat at 138.59. Commodity currencies showed a bit more distinction with both AUDUSD and NZDUSD falling by 0.6% to 0.661 and 0.6248 respectively while USDCAD closed unchanged.


  • Investor unease about the debt ceiling continued to weight on risk assets. The S&P 500 dropped 1.1% overnight while the NASDAQ fell by 1.3% and the Dow was down closer to 0.7%. European stocks fared hardly better with the FTSE 100 index down 0.1% and the EuroStoxx index off by 0.6%.
  • Asian equity markets were on the back foot on Tuesday with all major indices selling off amid concerns around global developments such as the US debt ceiling discussions, and some profit-taking. The Hang Seng closed down 1.2% while on the mainland the Shanghai Composite lost 1.5%. In Japan the Nikkei dropped 0.4% from an all-time high hit on Monday, snapping an eight-day winning streak.
  • Locally, the DFM dropped 0.4% and the ADX closed down 0.2%.


  • Oil prices notched another day of gains overnight with Brent futures up 1.1% at USD 76.84/b and WTI rallying by 1.3% at USD 72.91/b. Data from the API showed a draw in crude stocks of 6.8m bbl last week with large draws in gasoline and distillate as well.
  • Saudi Arabia’s energy minster, Prince Abdulaziz bin Salman, said speculators needed to “watch out” for turning negative on oil markets to a wide measure in recent weeks.