After the New York Fed, also the Philly Fed showed a sharper than expected drop in February, more than undoing the gains of the previous month. The headline index plunged from -24.3 in January to -41.3 in February. The breakdown shows a sharp decline in shipments (-32.4 from -16.7) and also new orders (-30.3 from -22.3), number of employees (-45.8 from -39.0) and average workweek worsened significantly. Prices paid (-13.7 from -27.0) came out higher, while prices received (-27.8 from - 26.2) fell somewhat. These figures indicate that producers are becoming again more pessimistic after the slight improvement in sentiment at the start of the new year.
Producer prices rose by 0.8% M/M in January after falling by 1.9% M/M in the month before. On a yearly basis, PPI dropped by 1.0% Y/Y, while the consensus expected to see a decline by 2.4% Y/Y. Looking at the details, energy prices rose by 3.7% M/M due to a sharp increase in gasoline (15.0% M/M) and a 5.4% M/M increase in heating oil. Also prices for tobacco, civilian aircraft, light trucks and cars were rising. Core PPI, excluding food and energy, surprised on the upside as it rose by 0.4% M/M. These significantly higher producer prices might raise expectations that also CPI figures, released tomorrow, might come out higher than expected.
In the week ended February 14, initial claims stayed unchanged at an upwardly revised 627 000, slightly above the consensus estimate of 620 000. Continuing claims, which are reported with a one-week lag, rose by 170 000 from 4 817 000 to 4 987 000. The total number of Americans collecting unemployment benefits is now close to five million, the highest level since the start of the series in 1967. But it might be important to note that the size of the labour force increased significantly since the start of the series.
The leading indicators showed the second consecutive gain in January. The headline index rose by 0.4% due to a significant positive contribution from M2 money supply, the interest rate spread and consumer expectations. Negative contributions came from jobless claims and building permits.
Other: Recession takes a toll on UK public finances
In the UK, public sector net borrowing came out at -3.3B in January, while the consensus was looking for a figure of -7.0B. This outcome is weaker than expected and is the smallest budget surplus for the month January in 14 years. Traditionally, January has a big surplus as taxes are boosted by bankers’ bonuses and it is one of the four months in the year that benefits from corporate tax payments. This year, tax income fell by 11% due to a 24% decline in corporation taxes, income taxes dropped by 4.3% and value-added tax plunged by 11% due to the 2.5% cut in VAT. These data indicate that the recession is taking a toll on public finances and these will also be hit in the coming months.
