Economic Highlights

The final November Markit/CIPS PMI readings were revised upwards. This was a pleasant surprise, but also unexpected in light of more stringent lockdown measures. The Services index was revised up from 45.8 to 47.6, and Construction from 53.1 to 54.7. There is little doubt that, outside areas such as travel and hospitality, the economy is faring a lot better than in the first round of lockdowns. Even so, we are likely to see overall GDP slip back again during Q4.

Consistent with other data from the US, the latest Employment report for November showed that the recovery is decelerating. This should hardly come as a surprise as more local measures are put in place to dampen the spike in Covid cases. Payroll growth was 245k, well below the consensus estimate of 460k and October’s 610k. If there is anything positive to take away, it is that it might encourage Congress to agree a new stimulus package. It will also keep the Fed in easing mode.

The PMI revisions in Europe were relatively meagre, but at least higher. Manufacturing came in at 53.8 vs 53.6, and Services at 41.7 vs 41.3. With Services accounting for the larger part of the economy, that left the Composite reading still at a pretty lowly 45.3 (vs 45.1).  Still a long way to go in this recovery. The ECB meets this week, and there is expectation of further stimulus measures – probably an extension of PEPP and TLTRO, and so more about ensuring the provision of liquidity.

Need we keep reminding everyone of how well China is doing? Export growth accelerated to 21.1% y/y in November from 11/4% in October (+5.1% m/m). Imports were a bit slower at +4.5% y/y vs +4.7% in October, but still pretty healthy.