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US: Philly Fed surprises on the upside

Fri, Dec 19 2008, 10:04 GMT
by KBC Market Research Desk

KBC Bank

next full report on jan 05, 2009

In December, the Philadelphia Fed came out better than expected at -32.9 while a figure of -40.5 was expected. Looking at the details, new orders (-25.2 from -31.4) showed some improvement while shipments (-28.7 from -18.8), average workweek (- 31.4 from -19.7) and inventories (-31.1 from -19.6) worsened significantly. Also number of employees (-28.7 from -25.2), unfilled orders (-32.3 from -29.1) and delivery time (-22.8 from -20.6) deteriorated. Although the headline figure came out better than expected, the details remained very weak.

In the week ended December 13, initial claims came out broadly in line with expectations. Initial claims dropped 21 000 from an upwardly revised 575 000 to 554 000, while the consensus was seeking for an outcome of 558 000. Continuing claims, which are reported with a one-week lag, declined less than expected from an upwardly revised 4 431 000 to 4 384 000. In the coming weeks, we expect to see another boost to claims due to the layoffs associated with plant closures at Chrysler and GM.

The leading indicators dropped 0.4% M/M in November, perfectly in line with the consensus estimate. The previous figure was downwardly revised from -0.8% M/M to -0.9% M/M. The leading indicators show a sharp drop in building permits (-0.46% M/M), stock prices (-0.36% M/M) and jobless claims (-0.29% M/M), while a strong positive contribution came from M2 money supply (0.64% M/M) and the interest rate spread (0.32% M/M).

EMU: IFO indicator drops to lowest level since 1982

In Germany, the IFO business climate indicator dropped from 85.8 to 82.6 in December, while the consensus was seeking for an outcome of 84.0. The sharper than expected decline was due to a plunge in current assessment (88.8 from 94.9). But also the expectations sub-index showed a decline (76.8 from 77.6). The details by sector show a clear deterioration the manufacturing sector (-40.2 from-29.5) and in wholesale trade (-26.1 from -21.9), while retail trade improved (-30.9 from -33.5) and construction stabilized. The IFO business climate indicator is now at its lowest level since November 1982 which indicates that business sentiment keeps worsening in Europe’s largest economy.

The euro zone trade balance showed a significant narrowing deficit in October. The trade deficit narrowed to 1.3B, while the consensus was expecting a deficit of 5.5B. The previous figure was upwardly revised from -5.7B to -4.4B. Both imports (-4.6% M/M) and exports (-2.8% M/M) were shrinking, which is traditional for times of recession.

Other: UK retail sales show unexpected rise

In the UK, retail sales surprised on the upside in November, rising 0.3% M/M. The consensus expected to see a decline of 0.6% M/M. The October outcome was downwardly revised from -0.1% M/M to -0.3% M/M and on a yearly basis, retail sales rose 1.5% Y/Y, after rising 1.7% Y/Y in the month before. Both food stores (0.2% M/M from 1.0% M/M) and non-food stores (0.2% M/M from -1.2% M/M) were growing. The rebound in non-food stores was due to an increase of 3.9% M/M in household goods stores. In recent months, UK retail sales persistently exceeded expectations, while all other surveys (eg CBI) pointed to ongoing weakness.

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Published on  Fri, Dec 19 2008, 10:23 GMT