October 4, 2021
September global manufacturing PMI ticked up last week after 4 months of lower numbers. May was the peak in global manufacturing PMI at 56, with last week’s data coming in at 54.10. Anything above 50 implies economic expansion, and 54.10 is still well above trend. Tomorrow brings final services PMI for September, which also decelerated from it’s May peak of 59.5 to 52.9 in August. We already saw the flash services PMI reports from Developed Markets, and tomorrow’s reports are unlikely to result in much upward momentum. The biggest report to follow this week will be Friday’s release of the September Jobs Report. We’re looking for non-farm payrolls of +575,000 (consensus for +500,000) and a 5% Unemployment Rate (consensus for 5.1%), down from 5.2% last month. We see inflation as the markets main concern with risk of higher inflation data coming in Q4. August Euro area inflation printed +3.4% year-over-year last week and now see global inflation as a problem for the global economy. Global sequential inflation likely accelerated to ~5% in September and that’s doing a lot of damage on global consumer. The natural gas story is top of mind based on Asia decarbonation efforts and Europe’s contract issues with Russia. Decarbonization efforts are the problem because supply responded almost immediately, while it could take more than a decade. Risks to inflation are on the upside, and that’s taking some multiple points out of expensive, crowded equity sectors like Tech.