In June, the Philadelphia Fed showed an unexpected sharp improvement. The headline figure rose from -22.6 to -2.2, while the consensus was looking for a figure of -17. The details show that the improvement was led by a surge in new orders (-4.8 from -25.9) and shipments (2.1 from -19.0), but also inventories (-15.3 from -28.6) and number of employees (-21.8 from -26.8) rose. Unfilled orders (-19.6 from -18.4), delivery time (-18.9 from -18.1) and the average workweek (-26.6 from -23.2) deteriorated somewhat. Both prices paid (-13.0 from -22.8) and prices received (-16.6 from - 33.8) rose significantly in June. This outcome confirms that the contraction in the manufacturing sector is lessening.
In the week ended June 13, initial claims rose by 3 000, from an upwardly revised 605 000 to 608 000, slightly above the consensus estimate of 604 000. More surprising was the development in continuing claims, which are reported with a one week lag. In the week ended June 6, continuing claims dropped by 148 000 from 6 835 000 to 6 687 000, while the consensus was looking for a moderate increase. This is the largest drop in continuing claims since November 2001, which is another positive sign after the recent stabilization in initial claims.
Other: UK retail sales disappoint in May
UK retail sales showed its first decline in three months in May. On a monthly basis, retail sales were down by 0.6% M/M, while the consensus expected an increase by 0.3% M/M. Looking at the details, food stores rose by 0.3% M/M, while non-food dropped by 1.4% M/M due to declines in non-specialised stores (-1.8% M/M), textile, clothing & footwear (-1.9% M/M) and other stores (-3.0% M/M), while household goods stores rose by 1.6% M/M. The strong declines in sales of clothing & footwear and at department stores will remind investors that the road to recovery will be rough.
Also in the UK, public sector net borrowing rose more than expected in May, from an upwardly revised 10.6B to 19.9B, while an outcome of 19.3B was expected. This is the biggest UK budget deficit since records started in 1993 as tax revenue fell (by 11%) and spending rose (by 7.4%). The breakdown shows that cash receipts of corporation tax dropped by 27% Y/Y, VAT fell by 19% Y/Y and income tax declined by 11% Y/Y. Net spending on social benefits rose by 7.9% Y/Y due to rising unemployment. Public finances, a measure of the cash entering and leaving the Treasury, showed a deficit of 18.8B, the highest level since records began in 1984.
The CBI industrial trends survey showed a slight improvement in total orders (-51 from -56), while export orders deteriorated from -46 to -52 and finished stocks dropped from 30 to 22. The volume expectations for the next three months stayed unchanged at -17 after improving significantly in the previous month. Expectations for average prices rose from -13 to -6.
