The ADP employment report showed an unexpected improvement in April. Nonfarm private employment declined by 491 000, while a drop by 645 000 was forecasted. The previous figure was upwardly revised from -742 000 to -708 000. The breakdown shows that employment fell by 229 000 in the service providing sector and by 262 000 in goods producing of which 159 000 in manufacturing. The improvement in the ADP report is an encouraging sign, but it is too early to conclude that the labour market is recovering as part of the improvement might be due to the development in the claims.


EMU: retail sales show unexpected decline in March

In March, euro zone retail sales showed the sixth consecutive monthly decline, while the consensus was looking for a marginal increase. On a monthly basis, retail sales dropped by 0.6% M/M, whereas the previous figure was upwardly revised from -0.6% M/M to -0.3% M/M. Looking at the details, sales for food, drink and tobacco dropped by 1.4% M/M, while sales of non food products stayed flat in March. The yearly figure declined further to -4.2% Y/Y, the biggest drop since the series started in 1996, which is a bit disappointing as a figure of -2.6% Y/Y was expected.

The final figure of euro zone services PMI for the month of April showed an upward revision from 43.1 to 43.8. The upward adjustment was mainly due to a revision in new business (40.2 from 39.1), while revisions to other components were relatively small. Although the index remains significantly below the 50 level, the improvement is an encouraging sign and indicates that the decline is slowing.


Other: UK services PMI is heading closer to 50

After the upward surprise in the manufacturing and construction PMI, also services PMI came out better than expected in the UK. In April, UK services PMI showed the fifth consecutive contraction as the headline index improved from 45.5 to 48.7, well above the consensus estimate of 46.3. Looking at the details, outstanding business and new business improved significantly and business expectations rose to the highest level for almost a year. There was also a slight uptick in employment. In the coming months, it will be interesting to see whether the index will be able to return above 50, indicating that the economy is expanding.