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US: Q2 GDP upwardly revised on higher exports

Fri, Aug 29 2008, 07:16 GMT
by KBC Market Research Desk

KBC Bank

The preliminary Q2 GDP report showed a change in GDP from 1.9% to 3.3%, while a smaller revision was expected (2.7%). The changes were broadly due to higher net exports as exports were revised up (13.2% from 9.2%) and imports (-7.6% from - 6.6%) down and on inventories, making a less negative contribution. Although the headline figure looks healthier, the underlying details stay weak as personal consumption and private investment remain at very low levels. Looking forward, the effect of the tax rebates should fade putting consumption under further pressure. Regarding export, the slowing in world growth should start to affect exports that will be less of a support for the economy. On the other hand, we might see the negative effect of housing construction on overall growth waning. Concluding, the US economy has kept up remarkable well, given the twin shocks of surging energy prices and a severe credit crisis, but the economy isn’t out of the woods yet and may face a very difficult H2 of 2008.

In the week ended August 23 initial claims fell 10 000 from and upwardly revised 435 000 to 425 000, exactly in line with expectations. Continuing claims, which are reported with a one week leg, rose a sharp 64 000 from a downwardly revised 3 359 000 to 3 423 000, a cycle high. The initial claims figures aren’t very reliable over the past five weeks, as the Federal extension of unemployment insurance benefits may have distorted the figures. However, the upward trend of the continuing claims is similar to previous periods when the economy was near or in recession.

EMU: National CPI raise expectations for lower euro zone inflation

M3 money supply growth slowed further in July (9.3% Y/Y), against 9.5% Y/Y in June. The less volatile three months average decreased from an upwardly revised 10.0% Y/Y to 9.6% Y/Y. Bank lending to the private sector slowed from 9.9% Y/Y to 9.4% Y/Y. Growth in household lending extended its downward trend in July (4.1% Y/Y from 4.2% Y/Y) and also lending to non-financials slowed from 13.6% Y/Y in June to 13.2% Y/Y in July. M3 money growth is now seriously below its peak, reached in November 2007 and according to the ECB lending survey, a further slowing can be expected over the coming months.

In Germany, the number of people unemployed fell 40 000 in August after a decline of 20 000 in the previous month, bringing the total number of unemployed to 3.2 million. Jobs created increased from 16 000 in June to 37 000 in July, which indicates that companies are still willing to hire new workers. The unemployment rate came out lower than expected at 7.6% (from 7.8%).

Belgian consumer prices fell 0.6% M/M in August, bringing the inflation rate down from 5.9% Y/Y to 5.4% Y/Y. Also in Spain inflation rates came out lower than expected at 4.9% Y/Y against 5.3% Y/Y in July. These inflation data confirm our expectations that euro zone flash CPI may fall back below the 4.0% Y/Y level.

Other: CBI report shows bleak picture of UK economy

In the UK, the CBI distributive trades survey’s retail sales volume plunged to -46 in August (from -36) while a slight improvement was expected (-32). This is the lowest level since series began in 1983 and for September, only a slight rebound is expected (-42). Orders placed fell from -37 to -56, while sales for the time of the year were slightly higher (-43 from -46) after a sharp deterioration in the previous month.

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Published on  Fri, Aug 29 2008, 07:47 GMT