US: ISM, global PMIs and economic growth momentum

In the first important data of the week, it is seen that the ISM manufacturing index decreased slightly from its 64.7 peak in March to 60.7 in April. Considering that the market expectation is 65 and there is a serious divergence, there are some situations that are overlooked. When we look at the sub-components, it is seen that the main index is affected downward by the new orders index. On this side, there is a decline from 68 to 64.3. The global supply shortage also has an important effect on this situation and it is understood that this is the factor that pulls the sector back. While prices increased to 89.6, reflecting the inflationary pressure, there is a slowdown in the employment index from 59.6 to 55.1. These levels are still well above the base value and remain in the industry growth zone.

The employment component is also critical for April non-farm payrolls, which will be announced Friday. The expectation for headline data is an increase of 980K. Strong increase even compared to pre-epidemic standards. With the continuation of the openings, temporary unemployment is also eliminated. When temporary unemployment is completely eliminated and the number of people who cannot return to work after the epidemic emerges, it will be easier to understand how much further employment has to go. The issue of wage increases is also important in terms of their contribution to inflation, but there is still an artificiality due to changes in employment and the mid-low wage scale of those left out in the pandemic period. Fed is still on hold, but the acceleration in the economy may bring the Fed communicating that "asset purchases can be reduced" in the summer.

Another factor is related to the economic divergence… April manufacturing PMI data, which is announced today at 62.9 level, point to an outlook that is not far behind for the Euro Area. It is important in terms of showing that the recession effects in the first quarter are also being overcome. Recovery will gain more weight if Europe catches up with slow progressive vaccination.

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