Economic data in the UK continues to underwhelm this week. New car sales were down for the third month in a row, manufacturing and construction PMI (Purchasing Manager’s Index) came in below expectations (although the media are encouraging people not to worry about this considering any number above 50 still represents growth). However, the trend in the last couple of months has been for either index to report weaker numbers. Naturally Brexit is being presented as a cause.
In contrast, manufacturing PMI in the Euro Zone is at its highest point in six years. This comes as the narrative of ‘normalising‘ ECB monetary policy gestates following ‘hawkish‘ comments from Mario Draghi last week. Data such as this will serve to strengthen the argument that the Euro Zone is proving robust and is nearing a time when the ECB can start to withdraw support from the markets (much as the U.S. is currently doing by raising interest rates and planning to shrink their balance sheet).
Bundesbank President Jens Weidmann (also Chairman of the Board of Directors at the Bank for International Settlements) spoke over the weekend about how ‘normalization will hopefully happen‘ in the Euro Zone and that it is ‘something we’re working on and discussing‘.
Evidently Europe is preparing to follow in America’s footsteps.
- Activity among the UK’s builders slowed by more than expected in June according to the latest survey snapshot of the sector.
- The Purchasing Managers’ Index came in at 54.8 in the month, down from 56 in May and lower than the 55 City of London analysts had pencilled in.
- Any reading above 50 signals growth.
Just over 243,000 new cars were registered in June, down 4.8% on the same month last year, according to the Society of Motor Manufacturers and Traders (SMMT).
Some 1.4 million cars have been sold so far this year, down 1.3% on the same period in 2016.
- The Italian government took control of Banca Monte dei Paschi di Siena on Tuesday, injecting EUR5.4 billion ($6.1 billion) into the troubled lender as part of a broad plan to bring one of Europe’s weakest banks back to health.
- The state recapitalization is the centerpiece of a deep overhaul of Monte dei Paschi, Italy’s fourth-largest lender, that will also include the transfer of the bank’s EUR28.6 billion in bad loans to a special vehicle, a cap on remuneration of its top executives and deep cuts in personnel.
- Students in England are going to graduate with average debts of £50,800, after interest rates are raised on student loans to 6.1%, according to the Institute for Fiscal Studies.
- Those from the poorest backgrounds, with more loans available to support them, will graduate with debts of over £57,000 says the think tank.
- Interest charges are levied as soon as courses begin and the IFS says students on average will have accrued £5,800 in interest charges by the time they have graduated from university.
- The Bank of England is stepping up its scrutiny of banks and other lenders on credit cards, personal loans and car purchases amid fears that growing consumer debt could rebound on the banking system.
- The bank is calling on firms to look at the terms under which they are granting 0% balance transfers on credit cards and the basis on which they are issuing personal loans, and to consider the impact of a fall in value of a car when providing vehicle finance.
- Its regulatory arm, the Prudential Regulation Authority, found that while the current pace of growth was not being driven by a relaxation of lending standards, it was concerned that to achieve their future plans they would have to do so.
- Major automakers on Monday reported a fourth consecutive month of lower U.S. new vehicle sales for June and came in below analyst expectations, despite hefty consumer discounts and looser loan terms, providing fresh evidence that 2017 will fall short of last year’s record year for the industry.
- Industry consultant Autodata put the industry’s seasonally adjusted annualized rate of sales at 16.51 million units, which was the lowest rate since February 2015. It came in below Wall Street expectations of 16.6 million vehicles and 2 percent lower than the June 2016 figure.
Zero Hedge: US Manufacturing Schizophrenia Continues – Best ISM Since Aug 2014, Worst PMI Since Dec 2016
- US Manufacturing stumbled to its lowest since Dec 2016 according to the latest ‘soft’ survey from Markit, as respondents reported a “disappointing end to the second quarter, with few signs of growth picking up any time soon.” However, if ISM’s seasonal adjustments are listened to, US Manufacturing just surged to its highest since Aug 2014.
- UK manufacturing activity came in below expectations in June, with the latest snapshot survey showing a moderation in the rate of growth.
- The Purchasing Managers’ Index was 54.3 in the month, below the 56.3 recorded in May and the 56.3 pencilled in by City of London analysts.
- Any reading above 50 indicates growth and the long-run average for the series is 51.6.
- Eurozone factories had their busiest month in more than six years during June, with the expansion even spreading to Greece, a persistent laggard.
- The pickup is consistent with other indications that economic growth in the currency area accelerated in the three months to June, having already speeded up in the first quarter.
- The pickup in manufacturing was led by Germany, Austria and the Netherlands, but also saw activity increase in Greece for the first time since August 2016, albeit very slightly.
- German savers critical of the European Central Bank’s ultra-loose monetary stance have received some words of reassurance from the head of their own monetary institution.
- Normalization will “hopefully happen, and that’s something we’re working on and discussing,” Bundesbank President Jens Weidmann told a public audience between live music and beer booths at the institution’s Frankfurt headquarters on Saturday. “We are coming out of the worst economic crisis in post-war history, and therefore expansive monetary policy is appropriate. We just shouldn’t hold onto this policy for longer than necessary.”
- “We are in complete agreement within the ECB Governing Council that expansive monetary policy remains appropriate and it’s clear we won’t completely throw on the brakes. What we do discuss — and controversially so — is how expansive it should be.”