Forex Brokers Overnight News Recap: Ifo Index, UK Retail Sales Fall Further Than Expected

News Recap | Written by CEP News | Jul 24 08 10:47 GMT |

(CEP News) - A weaker-than-expected business confidence index in Germany and Italy along with weakening manufacturing and services PMIs across the euro zone highlighted Thursday morning's euro zone economic news as UK retail sales contracted sharply. Further east, markets saw an unexpected contraction in the Japanese trade balance along with a bleak assessment of the Japanese economy from a BOJ board member. According to Germany's Ifo Institute for Economic Research, the business climate indicator for Germany fell to 97.5 in July, down from both the 100.1 level expected and the 101.2 figure recorded in the previous month. June's reading was revised down from an initial figure of 101.3. Looking at the sub-components of the indicator, the current assessment slid down to 105.7 from 108.3. Economists had expected a more moderate fall to 106.5 for the month. At the same time, the expectations component declined to 90.0 against forecasts of a 93.2 print for July. The previous month had recorded an expectations level of 94.6, revised down from 94.7 previously released. "The firms are much more dissatisfied with their current business situation and they are clearly more reserved regarding the six-month outlook," Ifo President Hans-Werner Sinn said in a pres release. "These results suggest that the economic upswing is coming to an end." According to the Office for National Statistics (ONS), retail sales in UK declined by a record 3.9% in June on a monthly basis, down from both the 2.6% decline forecast and the 3.6% increase recorded in the previous month. May's retail sales figure was revised down from a previous growth rate of 3.5%. In annualized terms, retail sales gained only 2.2% for the month. Economists had expected a growth rate of 4.4% in July following the 7.9% increase seen in May, revised down from 8.1%. According to advanced estimates from Markit Economics, the German purchasing managers' index for manufacturing fell more than expected to 50.9 in July. Economists had expected a fall only to 52.0 from June's 52.6 level. The manufacturing PMI level is the lowest since August 2005. Conversely, the German services PMI surprised to the upside, rising to 53.3 after slipping to 52.1 in June. The consensus had called for a further decline in the services indicator to 51.5 for the month. On Thursday, Markit Economics reported that the French purchasing managers' indexes for both manufacturing and services surprised to the downside in July. According to preliminary estimates, the French manufacturing PMI fell to a five-year low 47.3, down from both the 49.0 expected and the 49.2 figure observed in June. Meanwhile, the services PMI slid all the way to 47.0 from June's 50.1 level. Economists had only expected a decline to 49.7 for the month. July's service indicator level is the lowest recorded in the history of the series. The French business confidence indicator continued to slide in July as it dropped further to a reading of 98, marking its lowest level since May 2005, according to the National Institute for Statistics and Economic Studies (INSEE). Economists had expected a decline in the sentiment indicator to 100 following June's fall to 101. June's reading was revised down from an initial reading of 102. Following the release of the French and German purchasing managers' indexes, Markit Economics released its advanced estimates for the euro zone. According to the estimates, the manufacturing PMI for the monetary union fall all the way to 47.5 in July. The consensus forecast had called for a more moderate decline to 48.8 following June's slide to 49.1. The services PMI also surprised to the downside in July, decreasing to 48.3 against expectations of a 49.0 reading for the month. The index had fallen to 49.1 in June. Taken together, the PMI composite came in at 47.8 for July, down from both the 49.0 figure expected and the 49.3 level recorded in the previous month. On Thursday, the European Central Bank reported that the euro zone current account deficit rose to €21.4 billion in May, up from both the €6.0 billion deficit expected and the €7.4 billion deficit figure recorded in the previous month. April's reading was revised down from an initial deficit level of €9.2 billion. In seasonally adjusted terms, the ECB reported that the euro zone current account fell to a deficit of €7.3 billion in May after rising to a surplus of €1.5 billion in the previous month. April's figure was revised up from an initial reading of -€0.3 billion. On Thursday, the Institute for Studies and Economic Analyses (ISAE) reported that Italian business confidence declined further in July to 83.5. The consensus had called for a less pronounced fall in the indicator to 86.5 after slipping to 86.7 in the previous month. June's sentiment level was revised down from an initial reading of 87.1. According to the Central Statistics Office (CSO), Irish producer prices continued to see a decline in June, falling 2.8% year-over-year in June following May's 3.0% decrease. On a monthly basis, Irish PPI rose 0.9%, up from May's 0.8% growth rate. In an interview with Italian newspaper La Repubblica published on Thursday, European Commissioner for Economic and Monetary Affairs Joaquin Almunia stressed euro area governments should help, rather than criticize, the European Central Bank in the fight against surging inflation. Almunia also said that the current strength of the euro was a "real problem" and emphasized that the euro area needed to unite on the exchange rate message and speak with a "single voice". Furthermore, the EU Commissioner speculated that the U.S. dollar could fall further and said the yuan was undervalued. On Thursday, Statistics Sweden announced that the Swedish unemployment rate reached 8.1% in June, representing 416,000 unemployed individuals. Economists had only expected a rise in the unemployment rate to 7.3% after it dipped to 5.9% in the previous period. Statistics Sweden also said producer price inflation accelerated to 0.5% month-over-month in June, up from both the 0.4% growth rate expected and the 0.1% price increase seen in the previous month. Year-over-year, Swedish PPI increased 3.0%. However, economists had expected a growth rate of 2.9%, unchanged from May's reading. According to the results of a survey conducted by Statistics Denmark, consumer confidence in the country fell more than expected to -9.7 in July. Economists had only expected a fall to -7.5 after the sentiment indicator slipped down to -6.6 in June. Speaking at a meeting of business executives in Aomori, Bank of Japan board member Atsushi Mizuno said the government could soon announce a moderate recession in Japan. "The fog hanging over Japan's economy will stick around for the time being," said Mizuno, citing weakening consumer spending data. Nevertheless, there are some positive interpretations of the BOJ keeping rates at the accommodative 0.50% level, he said. However, it is important to keep in mind the side effects of low rates. According to the Japanese Finance Ministry on Thursday, the merchandise trade balance totalled ¥138.6 billion in June despite forecasts for a widening to ¥500.0 billion from the revised ¥362.2 billion reading in May. Prior to the revision, the balance was ¥365.6 billion. On an adjusted basis, the merchandise trade balance for June was ¥135.4 billion compared to forecasts for a contraction to ¥342.7 billion from a revised ¥520.1 billion in May. Prior to revisions, the adjusted balance was ¥642.3 billion. After the U.S. House of Representatives passed a housing bill including provisions for the creation of a new GSE regulator and a liquidity backstop to help the beleaguered Fannie Mae and Freddie Mac, U.S. Treasury Secretary Paulson expressed his gratitude for the bills having passed quickly. JP Merchandise Trade Balance Total June +¥138.6B vs. Exp: +¥500.0B Revised: +¥362.2B Prior: +¥365.6B JP Adjusted Merchandise Trade Balance June +¥135.4B vs. Exp: +¥342.7B Revised: +¥520.1B Prior: +¥642.3B FR Business Confidence Indicator July 98 vs. Exp: +100 Revised: 101 Prior: +102 FR Production Outlook Indicator July -34 vs. Exp: -17 Prior: -15 FR Own-Company Production Outlook July +2 vs. Exp: +4 Revised: +6 Prior:+ 7 FR PMI Manufacturing July Preliminary +47.3 vs. Exp: +49.0 Prior: +49.2 FR PMI Services July Preliminary +47.0 vs. Exp: +49.7 Prior: +50.1 DE PMI Manufacturing July Advance +50.9 vs. Exp: +52.0 Prior: +52.6 DE PMI Services July Advance +53.3 vs. Exp: +51.5 Prior: +52.1 IT Business Confidence July +83.5 vs. Exp: +86.5 Revised: +86.7 Prior: +87.1 DE IFO - Business Climate July +97.5 vs. Exp: +100.1 Revised: +101.2 vs. Prior: +101.3 DE IFO - Current Assessment July +105.7 vs. Exp: +106.5 Prior:+ 108.3 DE IFO - Expectations July +90.0 vs. Exp: +93.2 Revised: +94.6 Prior:+94.7 EU ECB Euro-Zone Current Account (SA) May -€7.3 vs. Revised: -€1.5B Prior: -0.3B EU PMI Manufacturing July Advance 47.5 vs. Exp: 48.7 Prior: 49.2 EU Euro-Zone Current Account (NSA) May Exp: -6.0B Prior: -9.2B EU PMI Services July Advance 48.3 vs. Exp: +48.8 Prior:+ 49.1 EU PMI Composite July Advance 47.8 vs. Exp: +49.0 Prior:+ 49.3 GB Retail Sales (M/M) June -3.9% vs. Exp: -2.6% Revised: +3.6% Prior: +3.5% GB Retail Sales (Y/Y) June +2.2% vs. Exp: +4.4% Revised: +7.9% Prior: +8.1% By Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, ngirgis@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.