Market Mover - BNP PARIBAS - Investment Services India

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Key Data PreviewChart 7: UK Manufacturing PMI80Future Business Expectations757065Business Activity6055504540Incoming New Business3505 06 07 08 09 10 11Sources: Reuters EcoWin ProOct (f) Sep Aug JulPMI manufacturing 50.0 51.1 49.4 49.4BNP Paribas Forecast: Down To EarthUK: Manufacturing PMI (October)Release Date: Tuesday 1 NovemberThe UK manufacturing PMI showed a surprising bounceabove 50 in September. The headline index rose to 51.1, upfrom a revised 49.4 in August. The manufacturing outputindex rose to 53.3, also the highest level since April.Backlogs of reported work fell further, suggesting that someof the bounce in output came from firms running down theirexisting order books. Still, total new orders rose to 50.5,which was also the highest level since April.We are not optimistic that last month’s strong reading can besustained in October. Certainly the CBI Industrial Trendssurvey for October slumped, and the BCC QuarterlyEconomic Survey looked weak. The October eurozone PMI(flash) has already shown a further fall below 50. And while itwould be nice to believe the UK data could follow moreclosely the US ISM than the eurozone PMI, the proportion ofthe UK export market that depends on the EU makes that nottoo likely. So we look for a fall in the UK PMI to around 50.Key Point:Last month’s resilience is likely to be short-lived.2.52.01.51.00.50.0-0.5-1.0-1.5-2.0Chart 8: UK GDP% y/y (RHS)% q/q-2.580 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10Sources: Reuters EcoWin ProQ3 (f) Q2 2011 Q1 Q4GDP q/q 0.4 0.1 0.4 -0.5GDP y/y 0.4 0.6 1.6 1.3Key Point:Little bounce back from stagnation in Q2. We expect a0.4% expansion on the quarter.12.510.07.55.02.50.0-2.5-5.0-7.5-10.0-12.5BNP Paribas Forecast: Another Weak Growth ReadUK: GDP (Q3 Advance 2011)Release Date: Tuesday 1 NovemberUK GDP expanded by just 0.1% in Q2. A number of specialfactors downwardly affected growth in that quarter. Theseincluded the additional bank holiday for the royal wedding,the impact of the Japanese tsunami and record warmweather in April. The ONS estimate these effects could haveshaved 0.5pp off Q1 growth, though the methodology used toarrive at this figure is broad brush.There is little guarantee that the lost output will be made upin future quarters in any case and the first estimate of Q3GDP looks likely to be fairly weak again. Looking at thepartial components received so far, the level of industrialproduction over July and August is around 0.2% higher thanQ2, while construction output is up 2.0% over the samemonths. Over Q3 as a whole, the volume of retail sales isdown 0.2%. The rest of the service sector is not very wellcovered by official data on a monthly basis, but the index ofservices data for July and the services PMI would suggestsomething like a 0.5% expansion in overall service sectoroutput. That would equate to a 0.4% rise in GDP in Q3, asimilar 0.4% rise on the year.Market Economics 27 October 2011Market Mover74www.GlobalMarkets.bnpparibas.com
Key Data PreviewChart 9: German Unemployment and the PMISources: Reuters EcoWin ProOct (f) Sept Aug JulUnempl. Change (‘000) -8 -26 -9 -10Unemployment Rate (%) 6.9 6.9 7.0 7.0BNP Paribas Forecast: Slower DeclineGermany: Unemployment Change and Rate (October)Release Date: Wednesday 2 NovemberThe German labour market surprised market consensus witha decrease of 26,000 in the total number of unemployed inSeptember – around five times larger than expected. Theunemployment rate decreased to 6.9%. This is the lowestrate measured in the series which started with reunification(9.6% on average).Meanwhile, the number of vacancies slightly rose to 478 000,up by 7,000: a slower pace than previous months.The employment component of survey indicators such as theIfo or PMI still indicate that companies are willing to hire, butmore slowly. The PMI flash index signals a decline in theemployment subcomponent by 1.3 points to 54.4. This levelwas, in the past, equivalent to a decline in unemployment ofaround 8,000.The unemployment rate itself is likely to remain unchanged inOctober.Key Point:Unemployment will decline further, but at a slower pace.Chart 10: UK Service Sector PMI65.062.560.0UK57.555.052.550.047.5Eurozone45.042.540.037.597 98 99 00 01 02 03 04 05 06 07 08 09 10 11Sources: Reuters EcoWin ProOct (f) Sep Aug JulPMI services 52.0 52.9 51.1 55.4BNP Paribas Forecast: Easing in OctoberUK: Services PMI (October)Release Date: Thursday 3 NovemberThe UK service sector PMI rose to 52.9 in September, upfrom 51.1 in August. Within the data, incoming new workrose, as did the employment series. The long-run seriesaverage of the headline PMI services series is around 55, sothe September release is consistent with positive but subtrendservice sector growth. The link between the officialservice sector data and the PMI appears fairly loose in anycase.There weren’t any particular reasons for the strength of theservice sector, but it seems plausible that the momentum inthe sector will fade somewhat over the next quarter,particularly as the manufacturing slowdown continues. Boththe CBI and BCC services surveys have fallen sharply in theirmost recent releases.Overall we expect a decline in the headline services PMI to52.0 in October.Key Point:Service sector momentum is fading and the PMI is likelyto fall in October.Market Economics 27 October 2011Market Mover75www.GlobalMarkets.bnpparibas.com
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Market Economics | Interest Rate St
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ECB to remain active onliquidity me
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The November FOMC meeting is the fi
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further actions to support stronger
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While a downgrade would not have a
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Low for longAs a result of the afor
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Japan: Exports Slow on End of Catch
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Japan: Lessons from a ‘Lewis Turn
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