Initial claims unexpectedly rose by 35 000 to 626 000 in the most recent week, the highest level in the cycle and the highest since October 1982. The steep rise is probably due to massive shutdowns at carmakers plants. The continuing claims increased by a more modest 20 000 to 4 788 000, which is the highest level ever (series started in 1967). The figures clearly show that the current recession is at best as severe as the 1981/82 recession.
The monthly retail sales fell in January for the fourth consecutive month, notably by 0.7% Y/Y, a weak result but nevertheless stronger than the ICSC forecast of a decline of 2 to 3%. Only Wal-Mart posted positive sales figures; all other retailers reported steep declines.
December factory orders printed very weak, down 3.9% M/M following a downwardly revised drop of 6.5% in the previous month. Consensus was looking for a more modest 3.1% M/M decline. On a yearly basis, orders are down a stunning 18.7%, suggesting just like in Germany that industrial activity collapsed in Q4. Looking to the details, part of the decline (non-durable orders) was due to the plunge of the prices of refined petroleum goods.
Q4 productivity increase by 3.2% ann., following a 1.5 rise in Q3 and was up 2.7% Y/Y. This is an extraordinary result given the plunge in output. Indeed, while business output dropped 5.5% in Q4, the aggregate hours worked (private sector) fell a whopping 8.4% (annualized). The combination of the productivity growth (3.2%) and the rise in compensation (5%) led to a moderate rise of 1.8% of unit labour costs in Q4 in annualized terms and a very subdued 0.7% Y/Y. This means that there are absolutely no wage-related inflationary pressures.
EMU: German factory orders collapsed in December
Germany factory orders once more deeply disappointed in December. Orders fell a steep 6.9% M/M (exp. -2.5% M/M) and were down 25.1% Y/Y. This simply shows that industrial activity really collapsed in Germany, the main industrial country in EMU. The decline was broadly-based including all main sectors.
Other: Bank of England cuts rates to fresh record low
At its February meeting, the Bank of England continued its aggressive easing cycle, as it cut its policy rates for the fifth consecutive month, this time by 50 basis points to 1%. In the statement, the MPC stated that it expects the sharp drop in output in Q4 to have continued at a similar rate in the early part of this year and saw a further tightening in the credit conditions. Hence, although the Committee expects the recent easing in fiscal and monetary policy, the substantial fall in sterling and past falls in commodity prices to provide a considerable stimulus over the course of this year, it judged that there remained a substantial risk of undershooting the 2% target that required a further cut in the policy rate. With regard to a quantitative easing policy, the Committee welcomed the government’s creation of an Asset Purchase Facility to ‘high-quality corporate debt and similar assets’.
