Expandable polystyrene (EPS) and polystyrene (PS)

LONDON (ICIS)–Business activity in the eurozone rose in August, driven by the services sector, which grew at the fastest pace in four months. Growth in services was largely due to the strongest expansion in France since May 2022 as the Olympics took place in Paris, according to S&P Global’s latest Purchasing Managers Index (PMI) data. This drove the flash services August PMI index to 53.3, up from 51.9 in July, which in turn helped push the HCOB (Hamburg Commercial Bank) composite PMI index to a three-month high of 51.2. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, warned, however, that the uplift could be temporary. “The boost largely comes from a surge in services activity in France, with the Business Activity Index jumping by almost five points, likely linked to the buzz surrounding the Olympic Games in Paris,” he said. “It’s doubtful this momentum will carry over into the coming months, however. Meanwhile, the overall pace of growth in the services sector has slowed down in Germany, and the eurozone’s manufacturing sector remains in rapid decline.” S&P’s August eurozone manufacturing PMI was at an eight-month low of 45.6, down slightly from July. An index figure above 50 indicates expansion and below 50 contraction. Elsewhere, the latest PMI data for the UK showed a significant increase in private sector business activity, with the composite index rising to a four-month high of 53.4. “August is witnessing a welcome combination of stronger economic growth, improved job creation and lower inflation, according to provisional PMI survey data,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

23-Aug-2024

SINGAPORE (ICIS)–Asian shares rebounded on Tuesday, staging a relief rally after historic losses the previous day, as fresh US economic data for July alleviated recession fears. Meanwhile, oil prices surged by over $1/barrel in early Asian trade, fueled by escalating concerns about the spreading conflict in the Middle East. Japanese Nikkei 225 index jumps 9.55% in early Asian trade Asian petrochemical shares follow regional market rebound, Asahi Kasei gains China's petrochemical futures continue decline In Europe the main stock markets stabilized, opening slightly up before falling back. The UK’s FTSE 100 was down 0.08% at 11:20 London time, while Germany’s DAX and France’s CAC 40 were 0.17% and 0.46% lower respectively. The stronger-than-expected US Institute for Supply Management (ISM) Services Survey for July helped ease growth worries. The overall services purchasing managers' index (PMI) improved to 51.4 in July, swinging into expansion and beating the consensus for a rise to 51.0 from 48.8 in June. A PMI reading above 50 indicates growth in the services sector. By 02:30 GMT, Japan's benchmark Nikkei 225 was up 9.55%, South Korea's KOSPI was 3.07% higher and Hong Kong's Hang Seng Index rose by 0.06%. Singapore's Straits Times Index (STI) was down by 0.96% while China’s benchmark Shanghai Composite Index inched 0.20% higher after shedding 1.54% on Monday. Asian petrochemical shares tracked the rebound in regional bourses, with Japanese major Asahi Kasei jumping nearly 14% and South Korean producer LG Chem up by 4.59%. China’s petrochemical futures, however, continued lower in early trade on Tuesday. At 10:30 local time (02:30 GMT), futures of petrochemical commodities, including plastics, methanol and glycols, were trading lower, after losing 0.4-2.1% in the previous session. Product Yuan (CNY)/tonne Change Linear low density polyethylene (LLDPE) 8,231 -0.3% Polyvinyl chloride (PVC) 5,650 -0.5% Ethylene glycol (EG) 4,590 -0.5% Polypropylene (PP) 7,570 -0.4% Styrene monomer (SM) 9,183 -0.2% Paraxylene * 8,120 -0.9% Purified terephthalic acid (PTA)* 5,644 -0.8% Methanol* 2,468 -0.5% Sources: Dalian Commodity Exchange, *Zhengzhou Commodity Exchange The global equity market sell-off intensified on Monday, with a wave of declines sweeping across major bourses worldwide. The rout began in Asia, where the Nikkei 225 index plummeted 12.4% day on day, marking its worst performance since 1987 while the KOSPI posted its steepest decline in its closing price to date. In Europe, the Stoxx Europe 600 index fell 2.2%, with all sectors and major indexes closing in negative territory. Utilities and oil and gas stocks suffered the steepest losses, leading the downturn in European markets. In the US, the Dow Jones Industrial Average plunged by about 1,000 points or down 2.6%, the Nasdaq dived 3.4% and the S&P 500 slid 3.0%. This marked the largest losses since September 2022 for the Dow and S&P, following a downturn late last week due to poor US jobs data and weak manufacturing PMI, which sparked recession fears. The unwinding of the yen "carry trade" after the Bank of Japan raised interest rates last week also added fuel to the retreat in global markets. For now, the US Federal Reserve has no intention of delivering an emergency rate cut before the Federal Open Market Committee (FOMC) meeting on 18 September, Singapore-based DBS Group Research said in a note on Tuesday. "The Fed wants markets to view the coming rate cuts as preserving the soft landing and supporting jobs, not as a delayed response to a weakening economy," it said. GEOPOLITICAL TENSIONS BOOSTING OILOil prices rose by more than $1/barrel in early Asian trade on Tuesday after dipping in the previous session, driven by supply concerns amid escalating tensions in the Middle East. "Markets are still waiting to see how Iran responds to Israel after it vowed retaliation for the assassination of Hamas’ political leader on Iranian soil," Dutch banking and financial information services firm ING said in a note. "Oil has been unable to escape the broader risk-off move seen across assets, as concerns grow over the potential for a US recession following some weaker macro data in recent weeks. This only adds to worries over Chinese demand." Reports that the Sharara oilfield in Libya has completely stopped production due to protests at the site also supported oil prices. This oilfield has a production capacity of 300,000 barrels/day but was producing around 270,000 barrels/day prior to the disruption. Focus article by Nurluqman Suratman Additional reporting by Fanny Zhang Thumbnail photo shows a stock market indicator board (Source: BIANCA DE MARCHI/EPA-EFE/Shutterstock) Updates, adding Europe detail in fourth paragraph

06-Aug-2024

SINGAPORE (ICIS)–Asian shares rebounded on Tuesday, staging a relief rally after historic losses the previous day, as fresh US economic data for July alleviated recession fears. Meanwhile, oil prices surged by over $1/barrel in early Asian trade, fueled by escalating concerns about the spreading conflict in the Middle East. Japanese Nikkei 225 index jumps 9.55% in early Asian trade Asian petrochemical shares follow regional market rebound, Asahi Kasei gains China's petrochemical futures continue decline The stronger-than-expected US Institute for Supply Management (ISM) Services Survey for July helped ease growth worries. The overall services purchasing managers' index (PMI) improved to 51.4 in July, swinging into expansion and beating the consensus for a rise to 51.0 from 48.8 in June. A PMI reading above 50 indicates growth in the services sector. By 02:30 GMT, Japan's benchmark Nikkei 225 was up 9.55%, South Korea's KOSPI was 3.07% higher and Hong Kong's Hang Seng Index rose by 0.06%. Singapore's Straits Times Index (STI) was down by 0.96% while China’s benchmark Shanghai Composite Index inched 0.20% higher after shedding 1.54% on Monday. Asian petrochemical shares tracked the rebound in regional bourses, with Japanese major Asahi Kasei jumping nearly 14% and South Korean producer LG Chem up by 4.59%. China’s petrochemical futures, however, continued lower in early trade on Tuesday. At 10:30 local time (02:30 GMT), futures of petrochemical commodities, including plastics, methanol and glycols, were trading lower, after losing 0.4-2.1% in the previous session. Product Yuan (CNY)/tonne Change Linear low density polyethylene (LLDPE) 8,231 -0.3% Polyvinyl chloride (PVC) 5,650 -0.5% Ethylene glycol (EG) 4,590 -0.5% Polypropylene (PP) 7,570 -0.4% Styrene monomer (SM) 9,183 -0.2% Paraxylene * 8,120 -0.9% Purified terephthalic acid (PTA)* 5,644 -0.8% Methanol* 2,468 -0.5% Sources: Dalian Commodity Exchange, *Zhengzhou Commodity Exchange The global equity market sell-off intensified on Monday, with a wave of declines sweeping across major bourses worldwide. The rout began in Asia, where the Nikkei 225 index plummeted 12.4% day on day, marking its worst performance since 1987 while the KOSPI posted its steepest decline in its closing price to date. In Europe, the Stoxx Europe 600 index fell 2.2%, with all sectors and major indexes closing in negative territory. Utilities and oil and gas stocks suffered the steepest losses, leading the downturn in European markets. In the US, the Dow Jones Industrial Average plunged by about 1,000 points or down 2.6%, the Nasdaq dived 3.4% and the S&P 500 slid 3.0%. This marked the largest losses since September 2022 for the Dow and S&P, following a downturn late last week due to poor US jobs data and weak manufacturing PMI, which sparked recession fears. The unwinding of the yen "carry trade" after the Bank of Japan raised interest rates last week also added fuel to the retreat in global markets. For now, the US Federal Reserve has no intention of delivering an emergency rate cut before the Federal Open Market Committee (FOMC) meeting on 18 September, Singapore-based DBS Group Research said in a note on Tuesday. "The Fed wants markets to view the coming rate cuts as preserving the soft landing and supporting jobs, not as a delayed response to a weakening economy," it said. GEOPOLITICAL TENSIONS BOOSTING OILOil prices rose by more than $1/barrel in early Asian trade on Tuesday after dipping in the previous session, driven by supply concerns amid escalating tensions in the Middle East. "Markets are still waiting to see how Iran responds to Israel after it vowed retaliation for the assassination of Hamas’ political leader on Iranian soil," Dutch banking and financial information services firm ING said in a note. "Oil has been unable to escape the broader risk-off move seen across assets, as concerns grow over the potential for a US recession following some weaker macro data in recent weeks. This only adds to worries over Chinese demand." Reports that the Sharara oilfield in Libya has completely stopped production due to protests at the site also supported oil prices. This oilfield has a production capacity of 300,000 barrels/day but was producing around 270,000 barrels/day prior to the disruption. Additional reporting by Fanny Zhang Thumbnail photo shows a stock market indicator board (Source: BIANCA DE MARCHI/EPA-EFE/Shutterstock) Focus article by Nurluqman Suratman

06-Aug-2024

SINGAPORE (ICIS)–Soaring Asian styrene prices have grabbed the attention of the global market following unexpected outages at European facilities. This price surge is expected to support both upstream benzene prices as well as downstream prices of expanded polystyrene (EPS), polystyrene (PS), and acrylonitrile butadiene styrene (ABS). Two styrene plant outages in Europe drive price surge upward rapidly. Benzene prices rise with styrene, boosted by August demand growth. ICIS expects EPS and PS prices to rise in August, ABS prices to remain flat due to the butadiene prices decreasing. In this podcast, ICIS senior analysts Jenny Yi and Jimmy Zhang discuss the trends and outlook for the Asian styrenic and benzene markets.

06-Aug-2024

HOUSTON (ICIS)–Shares of US-listed chemical companies fell sharply for the third consecutive trading day on Monday amid growing concerns that the US economy could head towards a hard landing and enter a recession. The following table shows the major indices followed by ICIS. Index 5-Aug Change % Dow Jones Industrial Average 38,703.27 -1,033.99 -2.60% S&P 500 5,186.33 -160.23 -3.00% Dow Jones US Chemicals Index 860.73 -19.78 -2.25% S&P 500 Chemicals Industry Index 897.91 -19.43 -2.12% Other market indicators also showed distress. The volatility index (VIX) rose by more than 43% to 33.57, reaching its highest level since the COVID-19 pandemic, according to the financial news network CNBC. The yield on the 10-year Treasury note fell to 3.8%, its lowest level in more than a year. Brent crude oil futures fell farther below $80/barrel. Natural gas futures fell farther below $2/MMBtu. Earlier on Monday, stocks in Asia and Europe were also sharply down, with Japan’s benchmark Nikkei 225 posting exceptionally steep losses. The financial press concentrated on Japan and highlighted what is known as the carry trade. Under it, investors took advantage of low interest rates in Japan to fund purchases of riskier investments such as US stocks. The strategy backfired after the Bank of Japan started raising interest rates. CHEM STOCKS PUMMELED IN PAST THREE DAYSThe total losses during the three-day stretch are much worse. The Dow Jones Industrial Average and the S&P 500 have fallen by more than 5% since then. Chemical producers have warned that their performance will get no help from the economy during the second half of the year. They gave up on a recovery, and some pointed to weakness among consumers, particularly those that perform do-it-yourself (DIY) projects on their homes, a segment that is especially sensitive to cost. Other chemical producers either missed their second quarter guidance, lowered their full year guidance or both. Since then, US economic statistics have shown more weakening than what was expected in the market. The US added fewer jobs in July than most economists expected, and the unemployment rate rose to 4.3%. US manufacturing activity shrank for the fourth consecutive month in July, with the purchasing managers' index (PMI) falling faster than expected. June construction spending fell 0.3% from May. Despite the pessimistic economic news, there were some statistics and trends that were not as poor. The collapse of the 10-year yield on Treasury notes indicates that the Federal Reserve has kept its benchmark federal funds rate too high for too long. That increases the likelihood that the central bank could lower rates at a faster pace. They could fall by half a point during its next scheduled meeting in September, and subsequent cuts could take place in November and December. Meanwhile, following a contraction in June, the US service sector expanded in July, according to the services PMI published by the Institute for Supply Management (ISM). Services make up 7/8 of the US economy. The following table shows the US-listed chemical shares followed by ICIS. Symbol Name $ Current Price $ Change % Change ASIX AdvanSix 24.74 -2.52 -9.24% AVNT Avient 40.395 -2.435 -5.69% AXTA Axalta Coating Systems 33.84 -1.37 -3.89% BAK Braskem 5.45 -0.33 -5.71% CC Chemours 18.565 -1.975 -9.62% CE Celanese 125.73 -5.82 -4.42% DD DuPont 77.15 -1.97 -2.49% DOW Dow 50.52 -1.49 -2.86% EMN Eastman 94.16 -3.33 -3.42% FUL HB Fuller 77.3 -3.92 -4.83% HUN Huntsman 21.27 -1.21 -5.38% KRO Kronos Worldwide 10.2 -0.64 -5.90% LYB LyondellBasell 91.93 -2.46 -2.61% MEOH Methanex 40.22 -2.81 -6.53% NEU NewMarket 530.05 -20.86 -3.79% NGVT Ingevity 35.52 -5.68 -13.79% OLN Olin 40.835 -2.135 -4.97% PPG PPG 120.02 -3.44 -2.79% RPM RPM International 114.305 -3.465 -2.94% SCL Stepan 73.33 -4.73 -6.06% SHW Sherwin-Williams 340.505 -6.745 -1.94% TROX Tronox 12.69 -0.62 -4.66% TSE Trinseo 2.375 -0.215 -8.30% WLK Westlake 132.31 -4.75 -3.47% Focus article by Al Greenwood (recast with closing prices for indices and shares) Additional reporting by Jonathan Lopez Thumbnail image shows a stock exchange. Image by Costfoto/NurPhoto/Shutterstock Please also visit Macroeconomics: Impact on Chemicals

05-Aug-2024

MADRID (ICIS)–US stocks were trading down around 3% mid-morning on Monday, with the major chemical companies posting double-digit falls on growing fears about a recession after the world’s largest economy reported weak economic data. Falls in the main stocks, however, had moderated by mid-morning although major individual names were still seeing large losses. The following shows the performance of the major stock indices followed by ICIS. Index 5 August Change % Dow Jones Industrial Average 38,629.93 1,107.33 2.79% S&P 500 5,171.95 174.61 3.27% Dow Jones US Chemicals Index 858.78 21.73 2.47% S&P 500 Chemicals Industry Index 896.31 21.03 2.29% Individual names in the US chemical sector were seeing double-digit losses – Trinseo, Ingevity and Chemours – with majors such as Dow and DuPont down around 3% (See table below). Earlier on Monday, stocks in Asia – with Japan’s benchmark Nikkei 225 posting its largest ever loss – and Europe were also sharply down. Crude prices also took a hit with the international Brent benchmark down more than $1/barrel to $75.74/barrel. MANUFACTRING DOWNTURN, WIDER WOES |A recession will hit the US beleaguered manufacturing sector further – after more than a year in the doldrums compounded by weak data in July. Employment data last week revealed lower-than-expected job growth and higher unemployment, sparking alarm among global investors about the health of the US economy. The equity market reaction on Monday was brutal in Asia, but was less pronounced in Europe and in the Americas. The slowing fall in some US indices on Monday could be linked to the much-awaited services PMI index for July, which showed that the sector is still expanding. “Economic activity in the services sector expanded in July, a trend that has been interrupted only three times — though twice in the last four months — since early in the coronavirus pandemic,” said the Institute for Supply Management (ISM), which compiles the index. “The services PMI registered 51.4%, indicating sector expansion for the 47th time in 50 months.” Any reading above 50% suggests that the sector is in expansion. Analysts are questioning whether the market reaction had been overblown, with some linking it to possible wild speculative moves in August when market activity slows sharply. “Weak payrolls [have] really escalated a profound move across the globe. However, the reality is that although payrolls was disappointing it's hard to know how disappointing given the distortions from Hurricane Beryl. It's like the market has added up 2+2 and made nine,” said Jim Reid, Deutsche Bank’s global head of economic research. “It's easily possible we'll get the additional three and two to make up the total but we're certainly not there yet. It's hard to believe such market moves would have occurred in any other month.” Symbol Name Price Change Change % ASIX AdvanSix 24.66 -2.60 -9.54% AVNT Avient 40.29 -2.54 -5.93% AXTA Axalta Coating Systems 33.645 -1.565 -4.44% BAK Braskem 5.435 -0.345 -5.97% CC Chemours 18.53 -2.01 -9.79% CE Celanese 125.31 -6.24 -4.74% DD DuPont 76.75 -2.37 -3.00% DOW Dow 50.56 -1.45 -2.79% EMN Eastman 93.74 -3.75 -3.85% FUL HB Fuller 77.225 -3.995 -4.92% HUN Huntsman 21.29 -1.19 -5.29% KRO Kronos Worldwide 10.28 -0.56 -5.17% LYB LyondellBasell 92.42 -1.97 -2.09% MEOH Methanex 40.29 -2.74 -6.37% NEU NewMarket 528.67 -22.24 -4.04% NGVT Ingevity 35.375 -5.825 -14.14% OLN Olin 40.785 -2.185 -5.08% PPG PPG 119.18 -4.28 -3.47% RPM RPM International 114.03 -3.74 -3.18% SCL Stepan 73.385 -4.675 -5.99% SHW Sherwin-Williams 338.27 -8.98 -2.59% TROX Tronox 12.65 -0.66 -4.96% TSE Trinseo 2.29 -0.30 -11.58% WLK Westlake 131.42 -5.64 -4.11% Front page picture: A stock exchange in Hangzhou, Zhejiang Province, China; archive image Source: Costfoto/NurPhoto/Shutterstock

05-Aug-2024

LONDON (ICIS)–The eurozone composite and services sector Purchasing Manager Indexes (PMIs) both fell in July as weaker business activity expansion pushed confidence to a six-month low. The S&P Global composite PMI hit a five-month low while the services activity index was at a four-month low, both having declined from June but remaining in expansionary territory above 50. The loss of momentum in July resulted from business activity rising only at a fractional pace, the intelligence firm said in its Hamburg Commercial Bank (HCOB) PMI statement. Services, the main economic driver, faced a stronger contraction in factory output, affecting private sector expansion. Demand fell and business confidence hit a six-month low as employment levels stagnated. In response, companies cleared work backlogs in July at the fastest rate since February. The survey also showed an increase in input cost inflation for both manufacturers and service providers. “The slump in the service sector is happening across the eurozone. Growth has slowed down in Germany, Italy and Spain. France is the only exception, where the PMI has gone up,” said Cyrus de la Rubia, HCOB chief economist.

05-Aug-2024

LONDON (ICIS)–The Eurozone manufacturing sector remained in deep contraction in July, with a steep decline in new orders leading to further contractions in output, and producers unable to pass on higher costs to customers The purchasing mangers’ index (PMI) for the sector stood at 45.8 in July, unchanged from June, while input prices saw the fastest increase in a year and a half, according to data from S&P Global. New orders are shrinking at the fastest rate in three months, while job shedding has continued for four months, with workforce reductions accelerating to the fastest pace since last December. A PMI above 50.0 indicates growth, while below 50 signals contraction. Hopes for overcoming the production slump have faded, prompting Hamburg Commercial Bank chief economist Cyrus de la Rubia to suggest a likely reduction in the GDP growth forecast from 0.8%. Greece and Spain, previously strong performers, saw growth slow to seven- and six-month lows of 53.2 and 51.0, respectively. Ireland's manufacturing sector remained broadly in growth territory, at 50.1, while the Netherlands, Italy, France, Germany and Austria were all in contraction territory . However, purchasing activity trimmed more gently in July compared to June, and supplier performance improved. Factory goods prices remain stable, suggesting firms are absorbing costs. This, along with weakening demand, is expected to shrink profit margins and investments, potentially keeping inflationary pressures in check. The manufacturing sector faces challenging months ahead with no signs of improvement.

01-Aug-2024

SINGAPORE (ICIS)–South Korea's petrochemical exports rose by 18.5% year on year by value to $4.19 billion in July, supporting the overall growth in total shipments abroad, official data showed on Thursday. The country's total exports rose by 13.9% year on year to $57.5 billion in July, following a revised 5.1% gain in June, the Ministry of Trade, Industry and Energy (MOTIE) said in a statement. South Korea's export growth streak has now reached 10 months, but a rebound in imports has trimmed the trade surplus, potentially weighing on GDP growth in the current quarter. South Korea's economy posted a slower Q2 annualized growth of 2.3% compared with the 3.3% pace set in the preceding quarter amid sluggish domestic consumption. Imports were up by 10.5% at $53.9 billion, reversing the 7.5% drop in June, resulting in a July trade surplus of around $3.6 billion. South Korea's trade balance from January to July ballooned by $51.2 billion, hitting a record high not seen since 2018. Exports to China reached $11.4 billion in July, a 14.9% year-on-year increase and the highest in 21 months, driven by growing demand for semiconductors, wireless communication devices, and other IT items as the industry’s recovery continues. This marks the fifth consecutive month that exports to China have exceeded $10 billion. As a result, South Korea’s total exports to China from January to July this year reached $74.8 billion, a 6.7% increase and the highest among all export destinations for the period. The country’s exports to the US set a new record for July at $10.2 billion, a 9.3% increase. South Korea's exports to southeast Asia reached $9.9 billion in July, a 12.1% increase, driven by strong demand for major export items such as IT products, petroleum products, and petrochemicals. This marks the fourth consecutive month of growth in exports to ASEAN nations. Exports to India increased by 13.4% to $1.6 billion, while those to the Middle East jumped by 50.6% to $2.2 billion for the second consecutive month and exports to Japan rose by 10.1% to $2.6 billion. South Korea’s energy imports in July rose by 11.9% year on year to $10.9 billion, fueled by a 16.1% increase in crude oil shipments and a 23.8% rise in gas imports. MANUFACTURING DIPS Separately, the S&P Global South Korea manufacturing purchasing managers' index (PMI) released on Thursday declined from 52.0 in June to 51.4 in July, indicating a slowdown in the sector. Although output and new orders continued to grow, rates of expansion eased to their lowest levels in three months. A surge in new product launches drove up orders, particularly from overseas clients, as domestic demand remained sluggish. Consequently, new export orders continued to grow for the seventh consecutive month, fueled by robust demand from southeast Asia, the US and Japan. “Together with today’s weaker-than-expected exports and softened business surveys, we are wary of a possible moderation in exports in the near future,” Dutch banking and financial information services provider ING said in a note. “However, export details – by product and by destination – are quite encouraging so far, thus it is still too early to conclude that export momentum is trending down.”

01-Aug-2024

LONDON (ICIS)–Eurozone private sector momentum almost slowed to a standstill in July, dropping to a five-month low as new orders fell and business confidence ebbed. The composite eurozone purchasing managers’ index (PMI) slipped to 50.1 in the month compared with 50.9 in June, according to S&P Global, with manufacturing sinking further into contraction and service sector growth slowing. A PMI score of above 50.0 signifies growth. Output in Germany sank for the first time in four months in July, while activity in France ebbed for the third consecutive month. Business confidence for the bloc as a whole dropped to its lowest level in six months which arrested the spell of new hiring. The rate of input cost inflation accelerated but low demand meant that companies pushed through the price increases at a softer pace, contributing to the slowest pace of change for inflation since October. The decline in manufacturing activity was the largest monthly fall in 2024, with services slowing but still managing to keep the region in overall growth. The manufacturing sector PMI fell to 45.6 in July from 45.8 in June, while the service sector index fell from 52.8 to 51.9 month on month. New export orders fell faster than total new business as players struggled to secure international sales, representing the 29th successive month of decline. “It’s unsettling how steadily companies in the manufacturing sector are slashing jobs month by month. The pace has barely changed over the last ten months,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which helps to produce the data. Despite the tepid economic data, sticky input price inflation makes the case for successive rate cuts more difficult, he added. “If only growth was considered, you find a strong argument for a rate cut in September by the ECB (European Central Bank). However, prices data did not provide hoped for relief,” de la Rubia said. “Our conclusion is that while a September rate cut will most probably be exercised, it will be much trickier to follow this path in the months thereafter, unless the downturn morphs into a deep recession,” he added. The unexpected pace of decline for the eurozone economy may result in economic forecast cuts down the line, according to Rory Fennessy, senior economist at Oxford Economics. “The eurozone's flash July PMIs corroborate the message sent by other leading indicators that the recovery is faltering. If leading indicators continue to underwhelm, this may result in a downgrade to our GDP growth forecasts for H2 2024,” he said. Momentum for the UK private sector continued to strengthen despite dynamics seen in the eurozone, with the composite PMI hitting 52.7 in July compared to 52.3 in June, a two-month high. UK manufacturing sector growth outpaced that of services, reaching a 29-month high of 54.4 compared to 52.4 in the latter industry. Average prices charged by companies eased but remain steep due to elevated costs, according to S&P Global. Input costs for the service sector eased on the back of softening wage pressures, but the manufacturing sector saw the sharpest rise in costs in a year-and-a-half on the back of Red Sea logistics disruption. The slower pace of price increases raises the odds of a central bank rate cut before autumn, but the pace of winding down current high interest levels is likely to be slow, according to S&P Global Market Intelligence chief economist Chris Williamson. “Prices have meanwhile risen at their lowest rate for three-and-a-half years, further raising the prospect of a summer rate cut,” he said. “However, policymakers will likely take a cautious approach to loosening policy amid signs of inflationary pressures pivoting away from services towards manufacturing, where Red Sea shipping delays and higher freight prices are adding to costs again,” he added. Thumbnail photo: Rotterdam port (Source: Hollandse Hoogte/Shutterstock)

24-Jul-2024