US: Richmond Fed index falls back into contraction
In October, the Richmond Fed manufacturing index unexpectedly fell back into contraction territory. The Richmond Fed index dropped from 4 to -7, while a marginal improvement to 5 was forecast. Also the details are poor with shipments (-9 from 9), new order volume (-6 from 7) and capacity utilization (-4 from 3) falling back into negative territory, while vendor lead time (-2 from -1) and number of employees (-5 from -5) continued to contract. Wages (10 from 6), average workweek (3 from -5) and order backlog (-3 from -9), on the contrary, picked up somewhat in October. Upward price pressures accelerated during the month with both prices paid (3.21 from 1.42) and prices received (1.99 from 0.44) rising significantly. Regional business confidence indicators continue to show a mixed picture in the US, suggesting that manufacturing activity continues to struggle at the start of the fourth quarter, probably due to uncertainty ahead of the Presidential Elections and due to slow growth in Europe and Asia.
EMU: consumer confidence improves marginally
After falling to its lowest level since May 2009, European Commission’s consumer confidence picked up marginally in October. According to the first estimate, European Commission’s consumer confidence rose from -25.9 to -25.6, while stabilization at low levels was expected. There are no details yet available, but after worsening sharply over the previous months, the slight pick-up in consumer sentiment is a welcome sign. The climate remains however poor with record high unemployment rates, slow wage growth and austerity measures weighing on consumers’ budgets.
After staying broadly stable around -11.5 in the third quarter, Belgian business confidence weakened at the start of the fourth quarter to its lowest level since October 2009. Belgian business confidence dropped from -11.6 to -13.5 due to broad-based weakness. Sentiment deteriorated across all sectors: manufacturing (from -13.7 to -15.6), trade (from -13.9 to -15.6), construction (-11.3 from -8.8) and business services (-6.0 from -4.4). Earlier yesterday, also French business confidence surprised on the downside of expectations. French business confidence dropped from 90 to 85 in October, while a stabilization was expected. Also the French reading is now at its lowest level since 2009. Ahead of today’s PMI’s and the German IFO, it is a poor sign suggesting that business conditions worsened further at the start of the fourth quarter.