Employment dropped by 522 000 in January according to the ADP report. This is very close to expectations as the consensus was looking for a decline of 535 000. The December outcome was upwardly revised from -693 000 to -659 000. The details show that employment fell by 279 000 (from -415 000) in the service providing sector and by 243 000 (from -244 000) in the goods-producing, of which 160 000 in manufacturing. Assuming that government payrolls are broadly unchanged, the ADP report would point to a decline in payrolls that is close to the consensus estimate (540 000).

In January, non-manufacturing PMI showed its second consecutive increase as the headline index rose from a downwardly revised 40.1 to 42.9. Both business activity (44.2 from 38.9) and new orders (41.6 from 38.9) were rising and also imports (40.5 from 32.5) came out higher after plunging in the month before. New export orders declined somewhat (39.0 from 39.5), while employment stayed broadly unchanged (34.4 from 34.5). Looking at inventories, both inventory change and sentiment dropped, while prices paid (42.5 from 36.1) rose. Together with the (slight) rebound in manufacturing PMI, this is an encouraging sign and indicates that the pace of decline is slowing.


EMU: retail sales remain weak in December

In December, euro zone retail sales came out flat (0.0% M/M), while the consensus was looking for a decline of 0.2% M/M. The November figure was sharply downwardly revised from 0.6% M/M to -0.1% M/M. On a yearly basis, retail sales dropped by 1.6% Y/Y compared to the consensus estimate of -0.4% Y/Y. Looking at the details, non-food products declined by 0.4% M/M, while food, drink and tobacco rose by 0.2% M/M.

The final figure of January services PMI came out broadly in line with expectations. The headline figure dropped to 42.2 (from 42.5 according to the first estimate) due to small revisions in all key components. At the national level, German and French services PMI were revised modestly loser.


Other: Norges Bank cut rates by an additional 50 bps

The Central Bank of Norway, Norges Bank, decided to cut rates by 50 basis points to 2.50% as the international downturn seems to be having a broad impact and is likely to be deeper than previously expected. However, the Bank tried to temper rate cut expectations as they said that developments should be monitored over a period before making substantial changes to the key rate.

In the UK, services PMI showed an unexpected, albeit small, improvement. The headline index rose from 40.2 to 42.5, while a flat outcome was expected. In detail, both new business (42.2 from 38.5) and outstanding business (40.1 from 38.4) rose, while employment (40.2 from 40.5) dropped to a new record low. Looking at prices, prices charged fell to 43.7 (from45.1), while input costs stayed broadly unchanged (50.7 from 50.9). Although business confidence, both in the manufacturing and in the services sector, remain at record low levels, this might be a first indication that the pace of decline is slowing.