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US: Weak ADP employment suggests weak payrolls

Thu, Jul 3 2008, 07:40 GMT
by KBC Market Research Desk

KBC Bank

The ADP employment report showed higher than expected job losses in June, with the private payrolls falling from a downwardly revised 25K in May to -79K in June. Two sectors were hit hardest: residential construction and financial activities related to home sales and mortgage lending, which shouldn’t be a complete surprise. The outcome suggests that the non-farm payrolls will be around -59K, if we take 15 K public job growth into account, which is in line with the consensus of -60K and shows again the downward trend in the labour market. Nevertheless, in the past months, the ADP employment consistently exceeded payrolls growth, which if repeated would mean a very weak payrolls report.

Factory orders rose 0.6% M/M in May, slightly above the consensus of 0.5% M/M, after rising 1.3% M/M in April. Excluding transportation, new orders rose a more modest 0.4% M/M, which is clearly below the April figure of 2.8% M/M. Most of the raise was due to a 1.3% M/M increase in nondurable petroleum and coal products, while durable orders stayed unchanged. This report shouldn’t be considered as an indication of an improvement in the economy as coal and petroleum products were contributing the most.

EMU: Producer price inflation accelerates

In the euro zone, producer prices rose in May at its fastest pace since series began in 1983. PPI data came out at 1.2% M/M and 7.1% Y/Y, after 0.9% M/M and 6.2% Y/Y in April. Again, the rise in energy prices accelerated (18.2% Y/Y from 14.5% Y/Y). Ex energy prices rose 3.8% Y/Y, against 3.7% Y/Y in April, showing an upward trend, which raises fears that second round effects are showing up.

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Published on  Thu, Jul 3 2008, 07:43 GMT