On Monday we have seen better than expected unemployment rate readings from the EU, where the figures came at 8.4%, as opposed to the expected 8.5%. The unemployment in the 19 countries of the euro zone remained steady in May, confronting the expectations of the economists of a worsening situation in the job market. The unemployment declined most in Spain and Italy, while in Portugal there was a small increase in the number of job seekers. The largest economies of the EU, France and Germany had stable unemployment rates. On the other hand, the euro zone manufacturing PMI dropped for the 6th month in a row, due to the concerns relating the trade barriers and the possible impact on the overall economy. The June final manufacturing PMI slipped to 54.9 from the previous month. According to Chris Williamson the chief business economist in HIS Markit, EU manufacturing has reported the weakest development in the past one and a half years, with the risks leaning towards output growth declining in the coming months. In addition, the business expectations regarding future production have decreased in June to the lowest since November 2015.
With regards to the UK manufacturing PMI, came up to 54.4 in June, compared to the expected reading of 54.1, where the output and new orders rose only slightly and the overall expansion in manufacturing output slowed in the previous month. The business optimism have dropped due to the concerns regarding possible tariffs and Brexit mostly. Director at survey compiler Markit, Rob Dobson stated that the industry may be affected by the stagnation and the UK will need to look to other sectors in order to have the GDP to match the expectations in the latter half of the year.
With regards to Brexit, Prime Minister Theresa May will gather her cabinet during this week in order to decide on how the exit from the European Union may/will affect Great Britain. There are only 16 weeks left before the EU and the UK should sign off the final exit deal. Now it is on May and her Cabinet to decide whether it will be a soft Brexit or no-deal, hard Brexit. According to Bloomberg, Olly Robins, Prime Minister’s Brexit negotiatior, believes that the UK will not get the trade deal they want, but will end up with a single-market access that will include accepting EU rules, or a plain trade deal which would harm business. What the deal would be is yet to be seen.
ECONOMIC CALENDAR EVENTS FOR JULY 3rd
AUD RBA Rate Statement
GBP Construction PMI
EUR PPI m/m
EUR Retail Sales m/m
CAD Manufacturing PMI
USD Factory Orders m/m
