Global Manufacturing on Knife’s Edge

Weekly Report - 27/04/2015

Global Manufacturing on Knife’s Edge


With global macroeconomic indicators pointed to protracted softness in global trade volumes, exporters facing weakening demand are seeing manufacturing indices miss expectations by a wide margin. GDP figures due in the week ahead should confirm the downturn as Central Bankers struggle to create growth.

Last Week

Deflation continues to circle the globe as evidenced by the latest inflationary data from New Zealand as nations that have managed to avert this situation are facing increased disinflation. Manufacturing data from the United States, China, and Euro Area continue to point to the slump in international trade as new orders fall and manufacturing indicators broadly contract. Across the Atlantic, the United States housing sector continues to wobble as evidenced by the divergent trends in existing home sales and new home sales. With the weather no longer a factor in determining why data is missing analyst expectations, the trend in new home sales is worrying as the Federal Reserve evaluates its options regarding interest rates. Durable goods excluding transportation and defense spending released on Friday showed that real investment in the US economy has fallen for 7-straight months. The UK has also seen fundamental data on the decline as evidenced by the latest retail figures and the unanimous vote of the Bank of England’s Monetary Policy Committee to keep policy unchanged. The US Dollar experienced broad losses over the week, seeing major peers gain on the weakness.


The Week Ahead

In the coming sessions, gross domestic product measures due from the United States, United Kingdom, and Canada will be the dominant forces moving financial markets. Expectations are for US GDP to slow to 1.10% after printing at 2.20% in the fourth quarter of 2014 in sharp contrast to Atlanta Federal Reserve models point to meager expansion at very best. Growth in the UK is also forecast to slow from a 3.00% annualized pace to 2.60%. Of no less importance is the interest rate decision from the Reserve Bank of New Zealand which is anticipated to keep the benchmark rate at 3.50% even though they could surprise economists with a 25 basis point cut. Inflation data from the Euro Area will also be relevant as it is forecast to remain in deflationary territory. Unemployment figures from the region will hopefully see the metric improve, with estimates pointing towards 11.20% versus the existing 11.30% rate.


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