GERMAN DATA: June Flash PMI: Stronger Manufacturing Demand Masks Fall In Hiring
The German flash June services PMI more than unwound May's fall, exceeding consensus at 49.4 (vs 47.8 cons, 47.1 in May, 49.0 in April). The manufacturing PMI was in line with expectations at 49.0, up from 48.3 prior for the strongest reading in 34 months. That helped the composite reading return to (slightly) expansionary territory at 50.4 (vs 48.5 prior).
- Details of the report highlight improved demand amongst manufacturers, but this did not stop overall manufacturing employment from falling. Meanwhile, services business confidence dipped in June. As such, the details of the report still display some signs of softness for Europe's largest economy, despite the stronger-than-expected headline readings.
- Little lasting reaction in Bund futures to the release, still -24 ticks today at 130.69.
Key notes from the release:
- "Underlying demand conditions showed signs of strengthening at the end of the second quarter, as underscored by the first rise in total inflows of new work across the private sector since May last year"...". The increase was driven by the manufacturing sector".
- "Goods producers reported a solid uptick in business from abroad, whilst there were also several mentions from surveyed firms of stronger domestic demand".
- "A lack of pressure on operating capacity in the goods-producing sector was reflected in further factory job cuts in June"...". Services workforce numbers rose modestly and slightly more so than they had done in May, but that was insufficient to prevent a thirteenth straight monthly decline in overall employment".
- "Turning to prices, June’s flash survey results indicated an uptick in the rate of output charge inflation. This was underpinned by slightly stronger price increases across services, with average factory gate charges falling for the second month running and to the greatest extent since February".
- "Preliminary data for June showed a slight reduction in businesses’ optimism towards growth prospects in the next 12 months. Confidence slipped just below the long-run average due to a dip in service sector expectations".
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
