WEEKLY ECONOMIC BRIEF – 5 October 2012 Chief ... - LGsuper

Economic Update
United States
• Economic indicators released over the week generally surprised to the upside,
providing some evidence that the current slowdown is showing signs of
stabilisation.
– Key business surveys picked-up, with the ISM manufacturing survey rising
from 49.6 to 51.5 in September, the first reading above the 50 threshold
since May. The non-manufacturing ISM survey rose from 53.7 to 55.1, its
highest level since March.
– Real consumer spending rose 0.1% in August following a solid 0.4% gain in
July. Light vehicle sales data rose strongly in September from 14.46 million
to 14.88 million (annualised), suggesting a pick-up in consumption over the
month. This places modest upside risks to our 1.6% annualised real
consumption growth forecast for the September quarter.
– ADP private payrolls rose 162,000 in September, suggesting a continued
modest improvement in employment since the slowdown in the middle of
the year. We continue to forecast the official non-farm payroll
employment measure, to be released tonight, to rise by 130,000 in
September.
– Construction spending was one of the few indicators to disappoint, falling
0.6 per cent in August. Residential spending continues to trend higher, but
non-residential spending has declined due to the uncertainty facing
businesses around the impending fiscal cliff.
• Despite the better data over the week, the indicators continue to suggest that
the US economy will expand at a below-trend pace of slightly under 2 per cent
annualised in the second half of 2012.
Euro area
• Limited new economic information emerged from Europe this week.
– The composite PMI for September edged up from the flash reading of 45.9
to 46.1. Nonetheless, the index remains at a four month low and is
consistent with a further contraction in the euro area economy during the
quarter.
– Real retail sales edged up 0.1% in August for the third consecutive month.
While retail sales have moved modestly higher in recent months, new car
registrations have fallen sharply suggesting a pull-back in overall consumer
spending during the quarter.
– Euro area unemployment rate remained at 11.4% during August.
Unemployment rose to 25.1% in Spain, but remains low at 5.5% in
Germany. A modest rise in the euro area unemployment rate to 11.6% is
expected over the next few months.
– Inflation edged higher from 2.6% to 2.7% in September.
United Kingdom
• Signs of slowdown emerging at the end of the September quarter.
– The manufacturing PMI fell from 49.6 to 48.4 during September, while the
services PMI dropped from 53.7 to 52.2.
• While we expect the UK economy to expand by 0.7% in the September
quarter, this is largely due to a rebound after the Diamond Jubilee public
holiday depressed activity in the June quarter and the impact of the Olympics.
Underlying growth in the economy is expected to be weak excluding these
temporary factors, which is supported by the PMI surveys released this week.
US -ISM survey (index, sa)
60
Non-manufacturing
55
50
45
40
Manufacturing
35
30
2007 2008 2009 2010 2011 2012 2013
US -Car and light truck auto sales (millions, annual rate)
16
15
14
13
12
11
10
9
2008 2009 2010 2011 2012 2013
Construction spending (% y/y)
30
20
10
0
-10
-20
Residential
-30
-40
Non-residential
Total
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Euro area -Retailsales (volumes, sa, m/m%)
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12
Euro area -Unemployment rate (%)
11.5
11.0
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
UK -Manufacturing PMI (index)
65
60
55
50
45
40
35
30
2007 2008 2009 2010 2011 2012 2013
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