EMU: Production disappoints, starting Q4 on weak note

US: strong retail sales despite poor Black Friday reports

Despite reports of disappointing Black Friday sales, US retail sales came out remarkably strong in November. Retail sales rose by 0.7% M/M, slightly stronger than expected and the previous figure was upwardly revised from 0.4% M/M to 0.6% M/M. Sales of motor vehicles and parts rose by 1.8% M/M, while gasoline station sales dropped by 1.1% M/M. Core retail sales, excluding autos and gas, surprised on the upside too, rising by 0.6% M/M, twice the expected pace. The breakdown shows that strength was broad-based led by sales of building materials (1.8% M/M), non-store retailers (2.2% M/M), eating & drinking (1.3% M/M), furniture (1.2% M/M) and electronics (1.1% M/M). Department store sales (0.3% M/M), sales of sporting goods (0.1% M/M) and general merchandise (0.1% M/M) rose only slightly, while health and personal care was flat. In the core reading, only miscellaneous (-1.3% M/M), sales of clothing (-0.2% M/M) and food & beverages (-0.1% M/M) fell back in November. As a result, also the control group surprised on the upside of expectations, increasing by 0.5% M/M and the October figure was upwardly revised from 0.4% M/M to 0.7% M/M.
Despite reports of disappointing early Black Friday sales and weakened consumer confidence, retail sales remained on track in November. The buoyant retail sales and especially the upbeat core reading suggest that personal spending will continue to support growth in the fourth quarter.

After falling to 300 000 during the last week of November, US initial jobless claims edged sharply up in the first week of December. Initial claims rose by 68 000 to 368 000 in the week ending the 7th of December, the highest level in two months. The less volatile four-week moving average rose from 322 750 to 328 750. Continuing claims, which are reported with an extra week lag, edged up too. Continuing claims rose by 40 000 from 2 751 000 to 2 791 000 in the week ending the 30th of November, off from the multi-year lows. The Labour Department added that the data reflected seasonal adjustment volatility around the Thanksgiving and Christmas holidays. Due to the volatility, it is difficult to draw any conclusions from the data, which will probably remain the case during the remainder of the year with the Christmas holidays approaching.

EMU: production disappoints, starting Q4 on weak note

Euro zone industrial production continued to disappoint in October. Industrial production dropped by 1.1% M/M, well below the consensus, which was looking for a limited increase (by 0.3% M/M). The previous figure was however slightly upwardly revised, from -0.5% M/M to -0.2% M/M. The details show that weakness was broad-based. Production of energy fell by 4.0% M/M, but also output of durable (-2.4% M/M) and non-durable consumer goods (-0.9% M/M) and capital goods (-1.3% M/M) dropped by 1.3% M/M. Only production of intermediate goods increased slightly in October, by 0.4% M/M. Looking at the country breakdown, production rose only in Italy (0.5% M/M), but dropped in Ireland (-11.6% M/M), the Netherlands (-3.5% M/M), Germany (-1.2% M/M), Greece (-0.9% M/M), Spain (-0.8% M/M), France (-0.3% M/M) and Portugal (-0.3% M/M). The industrial production data are a major disappointment and indicate that the fourth quarter started on a weak note, despite improving business confidence indicators. After a significant slowdown in growth in the third quarter, also fourth quarter growth will probably remain very slow.