Thursday, 5 February 2009

Not all negative

While the global economy is undoubtedly weak, not all the recent data have been negative.

On Monday, we saw a rise in the manufacturing PMIs in some of the major economies.

Tuesday brought us news that US pending home sales rose 6.3 percent in December.

Wednesday brought us news that the ISM non-manufacturing index rose in January. Employment, however, continued to fall. From Bloomberg:

The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 42.9, still below the reading of 50 that signals contraction...

Companies in the U.S. cut an estimated 522,000 jobs in January, a 12th consecutive reduction, a report from ADP Employer Services today showed...

The economy won’t stabilize “until we see employment start leveling off to where it’s not in that freefall,” ISM’s Nieves, said in a conference call with reporters. “I’m not seeing anything that’s instilling confidence.”

The euro area also saw an improvement in its services index, the PMI rising to 42.2 in January from 42.1 in December, but eurozone retail sales fell 1.6 percent in December from a year earlier.

Similarly, in the UK, the service sector PMI rose to 42.5 in January from 40.2 in December but the Nationwide consumer confidence index fell 8 fell points to 40.

However, as in manufacturing, Japan proved the exception with regards to the improvement in PMIs among the major economies. The Nomura Japan Services Purchasing Managers Index fell to 34.1 in January from 37.0 in December.

Meanwhile, outside the G-7, there have been more interest rate cuts recently. Australia cut rates on Wednesday, and on Thursday, we had rate cuts from Norway, Indonesia and Romania.

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