Wednesday, 1 February 2006

Confidence up in US and Europe, Japan PMI hits record high

There was mixed news for the US consumer yesterday. Reuters reported a rise in consumer confidence.

[T]he Conference Board, a private research group, said its index of consumer confidence rose to 106.3 in January from 103.8 in December, surpassing Wall Street's expectations.

But their wages did not keep up with inflation.

Earlier, the government said U.S. employment costs rose 0.8 percent in the fourth quarter as wage growth picked up and the increase in benefit costs slowed... In the 12 months to December, inflation-adjusted wages were down 0.8 percent, the fifth straight quarterly drop... With inflation taken into account, compensation costs actually shrank 0.3 percent in the last year, the first calendar-year decline since 1996.

Perhaps that is why recent retail sales were mixed.

Redbook Research said sales rose by 4.1 percent on a year-over-year basis for the week ended January 28 as consumers continued to redeem holiday gift-cards. Separately, the International Council of Shopping Centers and UBS Securities said sales slipped in the second pronounced weekly decline in a month.

Manufacturing, though, continues to hold up relatively well.

[T]he National Association of Purchasing Management-Chicago said its business barometer eased to 58.5 in January from 60.8 in December.

Which must be one reason why the Fed raised rates yesterday.

Also on Tuesday, the Federal Open Market Committee raised interest rates at a fourteenth consecutive meeting, putting the fed funds rate at 4.50 percent.

Financial markets suspect another increase from the Fed is likely in March, which would push up interest rates on various loans benchmarked to the fed funds rate.

There was also mixed news on the consumer front in the UK. Consultancy GfK NOP said its barometer of consumer sentiment rose to its highest level in six months in January, but the Confederation of British Industry's distributive trades survey found that retail sales volume fell more than expected in the month, although it is expected to recover next month.

And to add to the contradictory signals, the Bank of England reported yesterday that consumers' unsecured borrowing rose by its smallest amount in five years in December but mortgage lending accelerated more than expected to a 1-1/2 year high. This is after the Nationwide building society reported that house prices jumped by 1.4 percent in January, taking the annual rate of increase to 4.4 percent, its strongest since May 2005.

The mood elsewhere in Europe has also been relatively good recently despite some bad news from Germany. Bloomberg reports:

An index of economic sentiment in the dozen nations sharing the euro rose to 101.8, the highest since June 2001, from December's 100.6, a European Commission survey of more than 110,000 executives and 33,000 consumers showed. Increased confidence among service, manufacturing and construction companies led the improvement, the Brussels-based commission said...

In France, the second-biggest economy, unemployment declined for a seventh month, cutting the jobless rate to the lowest in almost three years, and consumer confidence climbed more than expected, separate government reports showed today...

German retail sales unexpectedly fell for a second month in December, the Federal Statistics Office said today. German unemployment unexpectedly jumped in January for the first month in four as companies brought forward job cuts before a law goes into effect tomorrow that cuts benefits for those newly out of work.

For once, though, Japan gave unambiguously positive signals on its recovery yesterday.

The jobless rate fell to 4.4 percent in December from 4.6 percent the previous month, the internal affairs ministry said, beating economists' forecast of 4.5 percent. For the first time in more than 13 years, the ratio of job offers for job seekers rose to 1.00 in December, meaning 100 jobs are said to be available for 100 job seekers...

In another set of upbeat data, spending by households headed by wage earners in December increased 3.2 percent year on year to an average of 379,769 yen (3,224 dollars), rising for the third straight month.

And Japan's manufacturing PMI hit a record high in January.

January's Nomura/JMMA Purchasing Managers' Index maintained its recent upward trend, rising for a fifth successive month to a level of 57.0, from 55.7 in December. It was the highest reading in the survey history, and represented a marked improvement in operating conditions.

No comments:

Post a Comment