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US: Claims continue their downward trend

Fri, Nov 6 2009, 08:44 GMT
by KBC Market Research Desk

KBC Bank

In the week ended October 18, initial claims dropped by 20 000 from an upwardly revised 532 000 to 512 000, while the consensus was looking for a figure of 522 000. Continuing claims, which are reported with an extra week lag, came out even more in line with expectations falling from an upwardly revised 5 817 000 to 5 749 000. The figures indicate that the trend in claims is still downwards and provides further evidence that the payrolls, scheduled for release today, might resume their improving trend soon.

Productivity surged by an incredible 9.5% (ann.) in Q3 following an already iron strong 6.5% in Q2. The gain in productivity reflects a 4% rise in output and a 5% drop in aggregate hours worked. The data confirm that corporate profitability is surg-ing, something already very visible in Q3 earnings season. It bodes well for company profits in the next few quarters and gives equities a boost. Of course, such an in-crease in productivity is untenable. Therefore it is also good for the labour market. Indeed, we should see the aggregate hours worked going up in the next few months and gradually it will be followed by net hiring. This will give the economy a more sus-tainable growth path via higher income and household spending. Finally, the produc-tivity surge helped push unit labour costs down by 5.2%, a favourable development for inflation. If we didn’t come out of the deep recession and with many struc-tural problems still at other doorstep, we would think that goldilocks had re-turned!!

EMU: retail sales disappoint again in September

Euro zone retail sales showed another disappointment in September. While the consensus was looking for the first increase in five months, retail sales dropped again. On a monthly basis, retail sales fell by 0.7% M/M, while an increase by 0.2% M/M was forecasted. The breakdown shows a decline in both food, drink, tobacco (-0.9% M/M) and non food products (-0.6% M/M). This outcome adds to the expec-tations that household consumption was unlikely to have played a big role in the third quarter recovery.

Other: UK industrial production rebounds in September

In the UK, industrial production rose by 1.6% M/M in September, while an increase by 1.2% M/M was expected. The previous figure was downwardly revised from -2.5% M/M to -2.6% M/M. Looking at the details, the improvement was broadly based with increases in manufacturing (1.7% M/M), mining& quarrying (1.7% M/M) and oil&gas (1.7% M/M), while elec, gas and water supply dropped somewhat. The better than expected outcome might be caused by the reopening of a lot of factories which were exceptionally closed in August for the summer holiday.

Yesterday, the Bank of England Monetary Policy Committee decided to leave rates unchanged, but voted to continue with its programme of asset purchases and to increase its size by £25 billion to a total amount of £200 billion. The Committee expects the programme will take three months to complete. On inflation, the MPC said that medium-term prospects continued to be determined by the balance be-tween two opposing sets of forces. On the one hand, there is a considerable stimulus still working through from the substantial easing in monetary and fiscal policy. On the other hand, the need for banks to continue the process of balance sheet repair is likely to limit the availability of credit.

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Published on  Fri, Nov 6 2009, 08:52 GMT