In the week ended January 3, initial claims dropped by 24 000 from a downwardly revised 491 000 to 467 000, while the consensus was looking for an outcome of 545 000. Continuing claims, on the contrary, rose from an upwardly revised 4 510 000 to 4 611 000, while a decline was expected. The unexpected drop in initial claims might be due to New Year and many unemployment offices may have been closed or short-staffed on the Friday after New Year. Continuing claims, which are now at the highest level since 1982, might be a better indicator of the real situation which raises fears for another awful payrolls report today.


EMU: Economic confidence drops to record low

Euro zone economic confidence dropped to the lowest level since series began in 1985. The headline index plunged from 74.9 to 67.1, while the consensus expected a figure of 71.8. The weakness was broadly based, as all sub-indices dropped significantly: business confidence (-33 from -25), consumer confidence (-30 from -25), services confidence (-17 from -12), retail confidence (-19 from -13) and construction confidence (-27 from -24). Looking at the business confidence details, orders (-47 from -36), past production (-38 from-25), exports (-46 from -35) and employment (-30 from -22) show important declines while inventories were rising. These figures confirm again that the recession is more severe than previously thought and the downturn hasn’t yet touched bottom.

The euro zone unemployment rate came out in line with expectations in November, rising from 7.7% to 7.8%, which is already well above the cycle bottom of 7.2% reached in March 2008. All evidence points to a further rapid rise in unemployment.

The German trade balance showed a declining trade surplus in November, while the markets expected to see an unchanged trade balance. The trade surplus contracted from 16.4B to 9.7B due to a 10.6% M/M drop in exports while imports fell 5.6% M/M. The record drop in exports from Germany illustrates that the global recession curbed demand and hits the export champion Germany.

German factory orders again surprised on the downside in November. On a monthly basis, factory orders plunged by 6.0% M/M, while a drop of 1.9% M/M was expected. The October figure was downwardly revised from -6.1% M/M to -6.3% M/M. The decline was led by a 9.5% M/M drop in intermediate goods, while consumer goods (-1.3% M/M) held up rather well. Both domestic and foreign orders were very weak. The Economics Ministry added that “given the order development, industrial production will markedly decrease in the coming months”.