Some further improvement in manufacturing will be welcome to the QE wait and see-ers
Yesterday I mentioned 3 key points to watch in the run up to the ECB. We've had two of those today, manufacturing and unemployment
In the manufacturing reports what is happening with prices is more important than the headlines. Here's a summary of what Markit had to say on prices;
Ireland
- PMI lower 53.3 vs 53.6 prior
- Prices paid - down for 3rd month, weakest decline
- Prices charged - Up marginally, 1st rise in 5 months
Netherlands
- PMI lower 53.5 vs 53.7 prior
- PP - Lower, falls eased
- PC - Higher for 2nd month, increase weaker than Oct
Spain
- PMI higher 53.1 vs 51.3 prior
- PP - Lower 3rd month running, pace of falls eased
- PP - Lower, 5th month running
Italy
- PMI higher 54.9 vs 54.1 prior
- PP - Lower
- PC - Lower 3rd successive month
France
- PMI lower 50.6 vs 50.8 prior
- PP - Lower for 3rd month, slowest rate
- PC - Lower, biggest fall in 6 months
Germany
- PMI higher 52.9 vs 52.9 prior
- PP - Lower, 4th month, slowest since Aug
- PC - Higher, 1st time in 3 months, fractional rise
Greece
- PMI higher 48.1 vs 47.3 (still in contraction)
- PP - Higher, rising since Feb
- PC - Lower again
Looking through the reasons given for lower paid prices was lower raw material costs. So we've seen some good improvement in manufacturing, and touches of weakness. Broadly most are still in expansion. On prices charged (inflationary) there are tentative signs that firms are willing to raise prices, even if it seems like they are testing the water. What with the lower euro, competitiveness should start to pay off.
For the all important ECB. There's enough here for the opposition to argue about but not enough for a hugely strong case to put to Draghi to why he should hold off further action. There might be enough to have him thinking about the severity of action
Unemployment
Better numbers seen again today
- Germany- lower
- Italy - Lower
- Ireland - Lower
- Belgium - Unch
- Eurozone - Lower
Were not breaking any records here (though Ireland did well falling from 9.3% to 8.9%. But the trend is clear that employment is rising and it's starting to look like a strong trend. All hail QE! More ammo for those that want to see QE untouched and allowed to work its magic further
Inflation is still the big number left tomorrow. It will need to do something special to really get the opponents of looser policy squawking. It will take something like core CPI moving to 1.3% or better to sway the doves but I think that's a push to see those numbers. As long as it doesn't fall, there will be enough doubt for the anti-increase mob to make a point to the doves about why they should leave things alone.
As far as QE goes, there's a case for not overegging the pudding when the economy is showing signs of life, and why a move on interest rates will help more by way of lowering the currency further, thus increasing that competitiveness and putting more money to work, rather than parking it at the ECB
We're coming into the final bend on our run to the ECB and tomorrow could be a big decide. It could certainly make the decisions even tougher