World Economic Weekly News

Week ended 4 May 2012

UK

Week in review:

PMIs were more mixed, with the manufacturing ISM soft but services better, and UK construction PMI improving despite weakness elsewhere.

US

Week in review:

US employment data was naturally the highlight, with the headline print of 115k well below expectations. A few positives were to be found in the details, such as yet another month of positive revisions – the latest number is above that originally reported for the last eight months. There were also reductions in the number of long term unemployed and the average unemployment duration, which is corroborated by the continued decrease in the total number of jobless benefit claimants. However the concern is that many of these workers are dropping out of the labour force as seen in the lower participation rate. Earnings numbers were weak .

Eurozone

Week in review:

The ECB meeting was relatively uneventful, with no changes to policy and mixed interpretation of Draghi’s comments. Downside risks were noted as ever, but his tone was viewed as less dovish than the markets had been hoping for. Indeed front end rates markets appeared to be priced for a cut, which remains a possibility should growth prospects subside further. PMI surveys over the week certainly pointed in that direction, with most countries suffering declines. Inflation is an obstacle, with the advance April number above expectations at 2.6%. Bund yields reached record lows, possibly in anticipation of the elections in France and Greece over the weekend, which will be covered in our next weekly.