The Week In Hindsight, 06 June 2014
UK economic barometers underwhelmed this week with a series of lukewarm readings for May. Although the overall outlook has not deteriorated, recent data indicates that the pace of growth has been slower to accelerate than many had previously anticipated.
Manufacturing and Construction PMIs mildly missed the mark against expectations, while net lending to individuals as well as mortgage approvals both indicated a slowdown in their respective areas for the month.
Later in the week Services data, the main headline grabber, did point toward a moderate improvement in conditions when the actual number beat forecasts for the second month running.
Over on the other side of the Atlantic, the US Unemployment rate outperformed against expectations when it remained flat at 6.3% VS expectations for an increase to 6.4%. This was as Non-farm payrolls saw monthly job gains of 217 k VS a 214 k forecast.
While neither of the above outcomes represent an overshot of expectations that warrants a parade in the streets over, they are potentially significant as downward revisions to last month’s record figures were minimal. The actual number for April jobs growth was revised downward from 288k to 282k; still the most rapid month on month increase for many years.
In addition to the positive employment figures in the US, Bureau of Labor Statistics earnings data for the month showed incomes for US workers increasing at a month on month pace of 0.2%, breaking the two month stall of nil growth in the official numbers.
In addition to the earnings and employment numbers, ISM Manufacturing and non-manufacturing PMIs came in mostly as expected, with a modest improvement in conditions throughout the period.
In short, while the anticipated economic rebound has been slow to take off in developed markets, the overall outlook does remain positive. With strong gains in employment across the UK and the US, the focus of central bankers and policy makers is now likely to remain firmly fixed upon growth in both productivity and consumer incomes.
While the FTSE 100 struggled to make headway on the week, despite a reversion to negative deposit rates by the ECB and cut to the refi rate; the Dow Jones advanced into record territory in win win trading once again.