Danske Research Team
Danske Bank A/S
Summary and outlook
Global indicators currently paint a very divergent picture of the world. The US economy is booming with strong leading indicators and ISM figures. On the other hand, data in the euro area remains weak while Japan is showing tentative signs of stabilisation. Chinese indicators point to slowing again after a period of strength.
We expect global growth to continue to show a divergent picture over the coming quarter. US ISM is expected to go lower but from a very high level. We expect euro PMIs to stabilise and edge higher towards the end of the year driven by lagged effects from stronger US and Chinese growth and a weaker euro. In China, we expect a further decline in PMI over the coming months as investment growth is easing again.
Details
In the US, the OECD leading indicator continued to increase in August and, along with strong ISM numbers, it seems underlying growth is gaining strength in the US. Looking ahead, we expect to see moderation in ISM manufacturing, partly in response to weaker exports based on the weakness we see in the rest of the world.
In the euro area, indicators continue to look soft. The OECD leading indicators decreased in August, ZEW has fallen a lot and ifo expectations have moved lower as well. However, real money growth is still holding up, suggesting that the current weakness is temporary.
The picture has been mixed recently. The OECD’s leading indicator is still strong but hard data and PMI have weakened. Very weak figures for industrial production suggest that GDP growth could drop below 7.0% in Q3 from 7.5% in Q2. Japanese data is also mixed as industrial production is weak but PMI has been trending higher in recent months.
Scandi manufacturing data is generally soft whereas services are holding up better.
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