New research from Danske BankMarket movers today
Today all eyes will be on the US labour market report. Focus remains on the unemployment rate and wage growth as these remain crucial for the Fed’s decisions on quantitative tightening. In line with the continued growth in employment, we expect further declines in the unemployment rate over time. However, we expect wage growth to remain around current levels for some time and to fail to show a significant pickup as the second round effects of several years with low inflation are dragging wage growth (see Flash Comment US: Fed likely to continue tightening on strong jobs report , 7 August).
Focus will also be on global PMI manufacturing figures with the release of the US, euro area, Swedish and Norwegian figures. For the euro area, the most interesting numbers are the first releases in Italy and Spain. In Italy, the composite PMI new orders index is around the level in Germany, although the two economies are doing very differently. In our view, there are still significant challenges for Italy including some political risks (see Significant Challenges for Italy: All you need to know about key issues , 14 August). In Germany, in contrast, the upcoming election should not change much (see German Election Monitor No. 1: Next euro area election unlikely to rock the boat , 29 August). For more about the Scandi PMIs, see page 2.
In the US, ISM manufacturing is also due for release. The gap between the ISM and PMI manufacturing figures is the biggest in 10 years, implying the two figures are sending mixed signals about the US economy currently. For the August print, we expect ISM manufacturing to stay around its existing high level and therefore not close in on the gap to PMI manufacturing. Note the preliminary PMI manufacturing figure has already been published and the final print should stay around the level seen in the preliminary report.