WEEKLY ECONOMIC BRIEF – 12 October 2012 Chief ... - LGsuper

Economic Update
United States
• Labour market conditions continue to gradually improve in the US
– Non-farm payroll employment rose by 114,000 in September, in line with
market expectations but modestly below our forecast of 130,000.
However, substantial backward revisions to July and August, totalling
86,000 jobs, revealed a healthier labour market in the September quarter.
Over the past three months, the average monthly gain in payrolls has been
146,000 a significant improvement from the 67,000 average gain in the
three months to June.
– The big surprise in the labour market report was the sharp fall in the
unemployment rate, which fell from 8.1% to 7.8%. This was due to an
873,000 gain in employment according to the household survey.
– Initial jobless claims fell by 30,000 to 339,000 in the week ending October
6, the lowest level since February 2008.
– The unexpectedly sharp fall in the unemployment rate and drop in jobless
claims likely reflects statistical noise and therefore is expected to be
largely reversed in the next data release. Nonetheless, looking through
the volatility there has been a clear gradual improvement in the US labour
market over recent months and we expect this trend will continue
through to the end of the year. Whether it can continue into 2013, will
depend on whether US politicians enact policies to avoid the impending
fiscal cliff.
• Trade deficit widens during August
– The trade deficit widened from US$42.5 billion to US$44.2 billion with
exports falling more than imports over the month.
– Based on the trade data to date, we expect net exports to subtract 30
basis points from annualised real GDP growth in the September quarter
(which we currently forecast at 1.8%).
Euro area
• Incoming ‘hard’ activity data continues to point towards a smaller contraction
in the September quarter than suggested by the survey indicators
– Industrial production (IP) for the euro area looks set to rise in August for
the second consecutive month. Individual country reports revealed a 1.7%
gain in Italy over the month, a 1.5% gain in France, a 1.3% gain in Spain, a
2.5% gain in Greece, a 0.5% gain in the Netherlands, a 6.8% gain in
Portugal and a flat result in Ireland. While IP fell 0.5% in Germany, this
followed a strong gain in the previous month, with IP up more than 5%
annualised in the quarter to date.
– Germany’s seasonally adjusted trade surplus rose from €16.3 to €18.3
billion due to a 2.4% gain in exports.
– Overall, in our view the ‘hard’ activity data continues to suggest a
contraction in real GDP of 0.2% in the euro area during the September
quarter, slightly better than the 0.6% fall suggested by the PMI surveys.
United Kingdom
• Activity deteriorates in August after the post Jubilee holiday bounce in July.
– Industrial production fell 0.5% in August after a 2.8% gain in July.
– The trade deficit deteriorated from £1.7 billion to £4.2 billion due to a
2.4% drop in exports and a 3.4% gain in imports.
– We continue to expect the UK economy to expand by 0.7% in the
September quarter, but this is largely due to a rebound after the Diamond
Jubilee public holiday and the impact of the Olympics.
US -Change in non-farm payrolls (sa, 000s)
300
250
200
150
100
11
10
9
8
7
6
5
4
50
480
460
440
420
400
380
360
340
320
-25
-30
-35
-40
-45
-50
-55
-60
-65
-70
0
3-month
moving average
Jul-11 Oct-11 Jan-12 Apr-12 Jul-12
US -Unemployment rate (%)
2005 2007 2009 2011 2013
US -Initial jobless claims (sa, 000s)
Claims
4-wk moving average
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12
US -Trade balance (sa, $USbns)
-20
2003 2005 2007 2009 2011 2013
Germany -Industrialproduction (sa, index, 2005=100)
120
115
110
105
100
103
102
101
100
99
98
97
95
90
85
2007 2009 2011 2013
UK -Industrial production (sa, Index, 2008 = 100)
104
2009 2010 2011 2012 2013
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