Economics Headlines ;GDP revision;US GDP; Europe sentiment - German July Unemployment –

Economics Headlines

·         US GDP - because of yesterday's June durable goods report we are revising up our estimate for tomorrow's Q2 GDP report from 2.5% to 2.8%. The revision is almost entirely due to an increase in inventory building last quarter, which now looks to have occurred at a $46 billion annual rate rather than a $37 billion pace, as previously assumed. 

·         GDP revision - tomorrow's release will revise GDP going back to the beginning of 2007. We've been asked which direction things will get revised. Trying to calculate revisions is a fool's errand, but if asked with a gun to our head we'd guess the net revision to the level of GDP will be downward, for two reasons. First, the statistical discrepancy (GDP - Gross Domestic Income) is positive ($221bn or 1.5% of GDP), suggesting the circle could get partly squared by revising down GDP. To be sure, in the past the statistical discrepancy has a far-from-perfect record in predicting revisions. Second, the rise in the unemployment rate over the past few years has probably been somewhat greater than would be implied by the decline in GDP. This mild anomaly could get repaired by revising down GDP. But to reiterate, its pretty tough to predict revisions. 

·         US jobless claims - Initial jobless claims for the week ending July 24 declined 11,000 to 457,000 from an upwardly revised 468,000 in the prior week. Initial claims have mostly hovered between 450,000 to 475,000 since the start of the year. The 4-week moving average for initial claims slid down from 457,000 for the week ending July 17 to 453,000 for the week ending July 24.

·         Europe sentiment - A huge monthly gain in Germany pushed Euro area economic sentiment to a new recovery high. Sentiment rose by 2.3pts in July to 101.3 in the Euro area overall, and by a huge 4pts to a much stronger 110.1 in Germany. In the periphery, sentiment rose in Greece (+2.5 to a still very low 66.3) and in Portugal (+3.1 to 93.1) but reversed last month's solid gain in Spain (-2.2 in July to 88.7). These indicators summarise confidence in all business sectors and among consumers and are scaled relative to their 1990-2009 averages.   

·         German July Unemployment – more strong German jobs figures - The German economy created another 25,000 jobs in June, which took the number of employed to within 25,000 of the pre-recession peak. The pace of job creation is runnning at 0.8% annualized. Unsurprisingly, this caused unemployment to decline by another 20,000 in July, while the unemployment rate fell by another tenth to 7.6%. In addition, the continued increase in job vacancies implies that these positive trends are set to continue in the coming months. Vacancies are rising steadily, despite the increase in employment, suggesting solid labour demand by German firms. The increase in reported vacancies is entirely driven by the non-subsidised category