Tuesday, July 6, 2010

Eurozone Economic Data

  • Eurozone services PMI mixed - The Euro area services PMI fell 0.7pts in June to 55.5; slightly better than in the flash report. Compared to an average decline of 0.3pts in Germany and France, the new country details in today's final reports showed the services PMI in June falling by 0.5pts in Spain, by 2.2pts in Italy, but rising sharply by 2.9pts in Ireland. This left the activity indices still signalling growth at 51.5 in Italy, 51.8 in Spain and 55.4 in Ireland, but at a slower pace than in Germany and France, where the services PMIs were at 54.8 and 60.8, respectively (Greece only has a manufacturing PMI). The details were mostly softer though, especially in Spain, where the new business index fell by 4.3pts to 47.5. It is unclear whether this has something to do with the VAT increase that came into effect in early July; more encouragingly, the Spanish manufacturing PMI held up well in June and the employment index still nudged higher in services. In constrast, the Irish services sector appears to be strengthening further. 
  • Eurozone retail sales softer in Q2 - After falling 0.9%m/m in April, Euro area retail sales recovered only 0.2%m/m in May. This left the April and May level 1.3% annualised below the 1Q10 average. And with car registrations also tracking a decline and consumer confidence down slightly, the available data point to total household spending declining in the Euro area in 2Q10, possibly by around 1% annualised. Similarly, at the country level, it appears that the gains seen in 1Q10 are being reversed in 2Q10, not only in the periphery. This could simply reflect the noisiness of the data, although it would be disappointing for the 2Q10 outcome. Nevertheless, most of the underling trends still appear broadly flat; see charts below for the various countries. Only France and Ireland are notable exceptions, with retail sales tracking increases of over 5% and over 8% annualised in 2Q10, respectively.  
  • UK services PMI comes in light - The business activity reading of the services PMI fell by a full point to 54.4 in June (JPMorgan & Consensus 55.0). The details were mixed: the new business and employment readings both rose, but outstanding business fell, and business expectations showed a notable eight point decline. The drop in expectations is the largest move in a single month in the survey's post-1995 history, suggesting that firms' confidence has been significantly hit

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