The rate hike path is now having the proportionate effects on the corporate sector and this can only temper further hawkish language.
23 August 2023
US purchasing managers’ index (PMI) figures follow the familiar story in Europe and the UK with both coming in below forecast for July. Manufacturing data was expected to show a modest decline from 49.0 to 48.9 over the month but actually hit further to the downside with a figure of 47, ie more contraction than expected. Services PMI is still expanding but at a slower rate with the 51 reported figure being below expectations of 52.1, so while still expansionary, it is only just. The rate hike path that central banks have taken the global economy to is now having the proportionate effects on the corporate sector and this can only temper further hawkish language. The bond markets seem to believe this is the case; but that is of course under the assumption that central banks collectively would not want to push the global economy into a slowdown and possible recession. With them maintaining the ‘higher for longer’ narrative, that horse might have already bolted.
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