As expected, the fall in GDP in Q2 was revised from 0.7% to a slightly smaller drop of 0.6%. However, this improvement is marginal compared to the huge amount of spare capacity building up. The consumer sector appears to be on a firmer footing now that the saving rate has risen to 5.6%, its highest level since 2003, yet this is still well below its long-run average. Meanwhile, the latest broad money figures suggest that QE is still having a pretty limited impact, with the MPC’s preferred measure of M4 rising by a meager 0.2% in July. The latest lending figures were nothing to write home about either. Mortgage approvals for new house purchase were up in September, but by less than 1,000, suggesting that the housing recovery might be losing steam. This data supports the view that it looks likely to be a long, slow recovery.
The UK CBI distributive trades survey suggested that retail sales, which were already holding up well, had a particularly good month in September. The rise in the reported sales balance from -16 in August to +3 took it into positive territory for the first time since April. On the face of it, the balance is consistent with annual growth of the official measure of sales volumes of around 4% compared to the rate of 2% or so seen recently.
Although some good news was contained in the UK data released yesterday, generally the figures highlight the fragility of the economic recovery.
With not much economic news out in the UK today, focus will switch to the United States. The ADP’s private sector jobs report for September will get attention when it is released at 12.15pm. It is expected to show the loss of 200,000 jobs. Traders follow the report closely, as a kind of preview to the government’s jobs report, but it is not always a good indicator. The government data Friday is expected to show the decline of 200,000 non farm payrolls, and an employment rate of 9.8%. Other data today includes the final look at second quarter GDP, at 12.30 p.m., and at 13:45 p.m. Chicago Purchasing Mangers report. Oil inventory data is reported after the close.
The UK market and the European markets have opened up a quarter of one percent. U.S futures markets are pointing to a slightly negative start when their markets resume trading this afternoon. Futures currently forecast the Dow to open up around 17 points; the Nasdaq to open down a fraction, and the S&P to open flat.
Sources: Reuters: BBC: Bloomberg: Lawshare: Deutsche Bank (db): Proquote: Financial Times: Wall Street Journal: CLSA: Sharescope: Market News. Capital Economics: CNBC: Wikipedia: GaveKal:
Please note this report provides a guide to some of the relevant areas that individual investors should consider discussing with an authorised adviser in relation to their specific circumstances, it does not constitute individual advice. As a result no action should be taken or refrained from being taken as a result of its content.
