Global PMIs should be Noteworthy
Tomorrow, preliminary Purchasing Managers’ Indexes (PMIs) will be released globally. This will be the world’s first significant economic data since the coronavirus has gone global. According to Investopedia, the PMI is an index of the prevailing direction of economic trends in the manufacturing and service sectors. A reading of above 50 represents an expansion and a PMI reading of under 50 indicates contraction.
Over the past month, the coronavirus has wreaked havoc on many global economies, resulting in factory shutdowns, store closures, and laid off workers. The flash PMIs will give us a look at how bad the economy has been since early March, when February’s numbers were finalized. Many countries were teetering around the 50 level before the pandemic. Now, many have likely fallen into contraction territory. Below are some of the more important expectations for tomorrow’s PMIs:
Country Manufacturing Last Services Last
Australia 50 50.2 48.3 49
Japan 43.7 47.8 41.8 46.8
Germany 40 48 42.5 52.5
EU 39 49.2 38.4 52.6
UK 45 51.7 45 53.2
US 42 49.4 43 50.7
Source: City Index
*There is also a Composite number for the manufacturing and services together, however traders tend to pay closer attention to the manufacturing and services numbers separately.
What will the economic data mean for the markets? Any numbers that are better than expected would be a surprise. However, traders are likely to ignore any better numbers and look ahead to the final data due on April 1st, expecting them to be revised lower. If the data is worse than expected, markets are likely to sell off.
Given that the data are released at different times throughout the day, we could see some extreme volatility. For example, if Australia’s data is weaker than expected, AUD/USD may head lower. However, later in the day if the US data is worse than expected, we may see AUD/USD go bid. The level of volatility will depend on which country’s data is closer to consensus.
Obviously, this information must be taken in context of what else is happening during the day. However, this will be the most significant data for March that we have seen so far. Traders will be watching!