Overnight News Recap: EU & UK Services PMIs Fall, EU Retail Rises, Oil Hits $145

News Recap | Written by CEP News | Jul 03 08 10:48 GMT |
(CEP News) - Downward revision to euro zone services PMI and a falling index in the UK highlighted the overnight economic news as Eurostat released an upbeat retail sales report and oil hit yet another record high.

Ahead of the European Central Bank rate decisions and the nonfarm payrolls report in the United States, WTI crude oil surged to a new record of $145.82 per barrel. Earlier in the evening, India banned the export of corn effective immediately.

According to Eurostat, retail sales in the euro zone shot up 1.2% month-over-month in May, up from the 0.6% increase expected. April had seen retail sales fall 0.6% in monthly terms. Year-over-year, retail sales rose 0.2% following the 3.0% decline recorded in May. Economists had expected sales to fall by a further 0.7% in annualized terms. Meanwhile, April's figure was revised down from an initial reading of -2.9%.

According to data released by Markit Economics on Thursday, the euro zone services purchasing managers' index fell to 49.1 in June. Economists had expected the index to fall to 49.5, in line with preliminary estimates and down from May's 50.6 level. The euro zone composite PMI slipped to 49.3, down from both the 49.5 figure expected and May's 51.1 reading. June's services and composite PMI figures are the lowest recorded for the euro zone since June 2003.

Looking at various euro zone states, the German services PMI declined to 52.1 in June, against expectations for a 53.3 reading. May had recorded a services PMI figure of 53.8. In France, the services indicator fell to 50.1, its lowest reading since June 2003, following May's fall to 50.5. However, economists had forecast an even stronger decline to 49.2, in line with preliminary estimates.

The Italian services PMI also surprised to the upside, unexpectedly rebounding to 48.5 in June from the previous month's 48.1 reading. Economists had forecast a further decline to 47.7 for the month.

On Thursday, Markit Economics announced that Spanish purchasing managers' index for services fell to 36.7 in June, the lowest reading ever recorded for any euro zone PMI. June's decline deepened the fall recorded in the previous month when the index fell from 55.3 to 43.3.

According to Statistics Netherlands, the Dutch economy grew 0.4% in the first quarter of 2008 in quarterly terms. Economists had expected Q1's growth rate to stay at 0.2%, unchanged from the previous quarter. Year-over-year, the economy expanded 3.3%, up from the 3.1% rise expected. Q4 2007's had recorded a growth rate of 4.1%, revised up from 3.1%.

Statistics Netherlands also reported that the Dutch consumer price index dipped 0.2% in June on a monthly basis following the 0.4% rise observed in May. However, economists had expected a stronger fall of 0.3% for the month. In annualized terms, Dutch inflation accelerated to 2.6%, up from both the 2.5% rate expected and the previous month's 2.3% rise.

On Thursday, Market Economics reported that the UK purchasing managers' index for June slipped to 47.1 in June, its lowest level since October 2001. Economists had expected a more modest decline to 49.5 after slipping to 49.8 in May.

According to the UK Treasury Official, foreign exchange reserves in the UK advanced by $462 million in June compared to the previous month's $97 million decline in May.

According to the Bank of England, second quarter lenders in the UK have reported a further reduction in the availability of credit to households and firms with further tightening expected over the next three months. The survey also suggests that banks expect default rates to rise further in lending to both households and firms.

In a BBC radio interview aired on Thursday, Treasury Secretary Henry Paulson said that both the U.S. and the U.K. were "very focused on downturn", but added that there was "plenty we can do" about the situation. "There's no doubt that high headline inflation numbers are a real concern but core inflation is relatively contained and my biggest focus today is on the downside risks which are housing, oil prices and what is going on in the capital markets," Paulson said. He also emphasized that the housing market correction needed to run its course.

Also speaking with the BBC, UK Chancellor of the Exchequer Alistair Darling expressed concern over the current credit crunch and its impact on the economy. "The second thing that is concerning us is the inflation pressures that are coming from very high oil prices," Darling said. Darling emphasized that the increase of short-term oil production needed to be ensured and that the UK must look to reduce its dependency on foreign supplied energy.

On Thursday, the Swiss Federal Statistics Office reported that inflation in Switzerland slowed to 0.2% on a monthly basis in June. Economists had expected a deceleration in price growth to 0.3% following May's 0.8% growth rate. In annualized terms, the Swiss consumer price index grew at 2.9%, unchanged from the previous month. However, economists had predicted an acceleration in the inflation rate to 3.1% for June.

On Thursday, the Central Bank of Iceland's Board of Governors announced that the policy interest rate would remain at 15.5%.

On Thursday, Statistics Iceland reported that the Icelandic trade deficit increased to ISK 900 million in June, up from May's ISK 510 million deficit level. "According to preliminary figures for June 2008 the value of exported goods amounted to ISK 38,300 million fob and the value of imported goods amounted to ISK 39,200 million fob," the statistics agency elaborated in a press release.

With inflation at its highest level since the mid-1990s, Sweden's Riksbank announced on Thursday that it would raise its repo rate 25 basis points to 4.5%. "The main reason for the high inflation is that energy and food prices in the world market have increased so much. But increasingly high domestic resource utilization in recent years has also contributed to rising inflation," the central bank said in a press release.

The Australian Bureau of Statistics (ABS) announced the Australian balance on goods and services in seasonally adjusted terms was a deficit of A$965 million in May 2008, a turnaround of A$977 million on April 2008. The figure for April has been revised to a surplus of $A12 million.

According to a report by AiG, Australia's performance of services index declined further to a reading of 45.4 in June compared to the 49.7 reported in May.

The foreign purchase of Japanese stocks fell ¥516.3 billion in the week ending June 27 after rising ¥34.2 billion in the previous week. Buying of bonds declined ¥422.1 billion following the previous week's ¥1333.2 billion sell-off. Meanwhile, the Japanese bought ¥65.0 billion in foreign stocks following the ¥17.7 billion purchased in the prior week. The Japanese also bought ¥496.9 billion in foreign bonds following the previous week's ¥224.9 billion sell-off.

AU AiG Performance of Service Index June 45.4 vs. Prior: 49.7

JN Foreign Buying Japan Bonds W/E June 27 -¥422.1B vs. Revised -¥1333.2B Prior: -¥1312.6

JN Foreign Buying Japan Stocks W/E June 27 -¥516.3B vs. Prior: +¥34.2B

JN Japan Buying Foreign Stocks W/E June 27 +¥65.0B vs. Revised: +¥17.7B Prior: +¥16.3B

JN Japan Buying Foreign Bonds W/E June 27 +¥496.9B vs. Revised: -¥217.7B Prior: -¥224.9B

AU Trade Balance May -A$965M vs. Exp: -A$900M Revised: +A$12M Prior: -A$957M

AU Exports (M/M) May +1.5% vs. Revised: +10.1% Prior: +5.8%

AU Imports (M/M) May +6.0% vs. Revised: -1.9% Prior: -2.2%

IT PMI Services June 48.5 vs. Exp: 47.7 Prior: 48.1

FR PMI Services June Final 50.1 vs. Exp: 49.2 Final Prior: 49.2

DE PMI Services June Final 52.1 vs. Exp: 53.3 Prior: 53.3

EU PMI Services June Final 49.1 vs. Exp: 49.5 Prior: 49.5

EU PMI Composite June Final 49.3 vs. Exp: 49.5 Prior: 49.5

GB PMI Services June 47.1 vs. Exp: 49.7 Prior: 49.8

GB Bank of England Second Quarter Credit Conditions Survey

GB Official Reserves (Changes) June +$462M vs. Prior: -$97M

GB U.K. Bank of England Quarter credit Conditions Survey

EU Euro-Zone Retail Sales (M/M) May +1.2% vs. Exp: +0.6% Prior: -0.6%

EU Euro-Zone Retail Sales (Y/Y) May +0.2% Exp: -0.7% Revised: -3.0% Prior: -2.9%

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 with contributions from Tim Stackpool, tstackpool@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

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