Data round up on a busy European session
Frankfurt (July 6) It has been a pretty data-heavy session in Europe this morning. For the most part, it has been positive and on the construction PMI side the numbers have been positive but the ZEW reading in Germany heavily missed expectations from analysts.
Starting with the German Construction PMI, once again the report noted supply shortages as the main reason for any kind of slowdown. The report said, "Supply bottlenecks impeded Germany's construction sector June, contributing to further declines in output and new orders, as firms struggled to source materials and demand was impacted by surging price pressures". Obviously, it is a positive thing that restrictions in the nation are getting looser but there are specific cost pressures in relation to oil and materials that are very persistent at the moment.
In the U.K., output growth hit a 24-year high in June. The recovery has been led by house building and commercial work. Once again building supply has been an issue as supplier delivery times lengthen to the greatest extent on record. Another really positive sign was the fact that the rate of job creation moderated since May but remained among the fastest seen over the past seven years. Tim Moore, Economics Director at IHS Markit said "Purchasing prices and sub-contractor charges both increased at a survey-record pace in June, fuelled by supply shortages across the construction sector. Escalating cost pressures and concerns about labor availability appear to have constrained business optimism at some building firms".
German Markit Construction PMI Jun: 47.0 (prev 44.5)
French Markit Construction PMI Jun: 48.9 (prev 51.1)
Italian Markit Construction PMI Jun: 57.9 (prev 58.3)
Eurozone Markit Construction PMI Jun: 50.3 (prev 50.3)
U.K. Construction PMI Jun 66.3 vs exp 63.8 (prev 64.2)
German ZEW Economic Sentiment (Jul) 63.3 vs exp 75.2 prev 79.8
From a base metals perspective, these reports clearly show that there is scope for even more demand. Price pressures have been consistent across the board and the China inflation crackdown story clearly had an impact on prices. The question is if the U.S. and European demand can overcome that slack and if the price pressures will remain consistent. From the latest manufacturing and construction PMI reports, it seems clear that for now, that is the case.
Later in the session, we will get the latest ISM Non-Manufacturing PMI (Jun) which is expected to hit 63.5 (prev 64.0). Tomorrow there is also the matter of the latest FOMC meeting minutes to digest.
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