Saturday 7 October 2006

Mixed US jobs report, strong European factory reports, but slowdown still expected

The US jobs report was the focus of attention yesterday, and perhaps more so than usual. Reuters reports:

U.S. employers added a scant 51,000 jobs in September, far fewer than expected, but the job count for prior months was revised sharply higher and wage earnings rose, dimming hopes for interest rate cuts next year.

The Labor Department's closely-watched jobs report on Friday also revealed an unexpected drop in the unemployment rate to 4.6 percent -- matching a five-year-low -- from 4.7 percent in August.

The department said it had drastically undercounted job growth in the 12 months through March, indicating labor market tightness which is likely to keep the Federal Reserve on high alert for inflationary pressures.

Prior revisions notwithstanding, 51,000 for September does look awfully low. But over the last few years, such a low number does turn up every once in a while, so it is not necessarily the start of a trend, even assuming that it does not get revised up subsequently.

Meanwhile, the Federal Reserve also released its report on consumer credit yesterday.

Separately, the Federal Reserve said higher credit card usage pushed up U.S. consumer credit by $5.0 billion in August to $2.352 trillion for an annualized 2.6 percent increase that was in line with analyst expectations.

The news from Europe was a little more upbeat.

Bloomberg reports that German factory orders unexpectedly surged in August.

Orders increased 3.7 percent in August compared with a revised 2.1 percent in the previous month, the Economy Ministry said in a faxed statement today. Economists expected a 0.4 percent drop, the median of 42 forecasts in a Bloomberg News survey showed. From a year earlier, orders rose 14.6 percent.

While Reuters reports that British factory output rose twice as fast as expected in August.

The Office for National Statistics said manufacturing output increased by 0.4 percent in August, the fourth consecutive rise and double expectations for a 0.2 percent gain, although the annual rate was in line with forecasts at 1.5 percent.

But it was not all rosy.

[F]alls in oil and utilities production kept output growth in the wider industrial sector at a more subdued 0.1 percent in August...

Friday's data showed factory output rose by 0.7 percent in the three months to August compared with the previous three months, down from 0.8 percent in the three months to July.

The wider industrial measure, meanwhile, slowed to be flat over the period.

And the National Institute of Economic and Social Research sees Britain's economy growing by just 0.4 percent in the third quarter.

Japan looks to be slowing too, according to its leading index. Bloomberg reports:

The leading index, which comprises indicators including machinery orders and stock prices, sank to 20 percent in August, from 27.3 percent in July, the Cabinet Office said today in Tokyo. A number below 50 indicates the economy will slow in three to six months. The median forecast of 24 economists surveyed by Bloomberg News was for the index to drop to 10 percent.

The Conference Board's leading index for Japan leads to the same conclusion.

The Conference Board reports today that the leading index for Japan decreased 0.4 percent, while the coincident index increased 0.3 percent in August... With this month's decline, the level of the leading index is now -0.9 percent below its most recent peak in April.

And the OECD sees the same fate for the rest of the OECD economies.

The latest composite leading indicators (CLIs) suggest that slowing economic expansion lies ahead in the OECD area, with August 2006 data showing weakening performance in the CLI’s six month rate of change in all the Major Seven economies except Canada. The latest data for major OECD non-member economies point to a weakening outlook for China and steady expansion in India, Russia and Brazil.

The CLI for the OECD area decreased by 0.1 point in August to 109.6 from 109.7 in July, and its six-month rate of change was down for the fifth consecutive month

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