US: Lower claims
Initial claims dropped unexpectedly to 308 000 from 318 000 previously. The market was looking for a slight increase to 320 000. Continuing claims rose by 32 000 to 2 527 000. The low claims suggest that firms aren??™t shedding labour. The continuing claims on the contrary are gradually rising slightly. This suggests that firms are reticent to hire extra workers.
Q4 GDP was revised slightly up to 2.5% from 2.2% previously, according to the final Q4 GDP report. It doesn??™t change the outlook for the economy going forward. There were upward revisions for consumption, net exports and inventories, but downward revisions for business investment and residential investment. These revisions were small though.
EMU: Retail PMI rebound on Germany
In the euro zone, the Bloomberg retail PMI spurred higher in March from 49.8 to 53.4, on the back of a strong improvement in Germany (52.8 vs. 45.0) and France (56.8 vs. 54.7), while conditions slightly deteriorated in Italy (49.6 vs. 50.4). The major improvement in Germany gives some additional backing to the view that the VAT increase of the beginning of the year won??™t have a lasting negative impact on the economy. Earlier business conditions in retailing also improved in the German IFO indicator.
Consumer spending will also be supported by the ongoing improvement in the German labour market, where unemployment once again declined by more than expected in March, -65K versus an expected ??“46K. As a result, the unemployment rate continued its downtrend falling to 9.2% in March from 9.3% in February. Employment on the other hand rose further by 30K in February compared to 44K in the previous month.
In contrast to the German CPI, the Spanish flash CPI declined slightly in March from 2.5% Y/Y to 2.4% Y/Y, while in Belgium there was a slight increase from 1.80% Y/Y to 1.82% Y/Y.
Other: Iron strong CBI distributive trades report
In the UK, the data continue to come out at the stronger side of expectations suggesting that the impact of the recent rise in interest rates remains rather limited for now.
The sales balance of the CBI distributive trades report rose further to 32, the highest level since December 2004 and far better than the expected 16 in February. As a result, the balance of orders placed by suppliers rose to 22, the most positive since June 2004. According to the CBI, almost all retail sectors performed well in March, especially those linked to the housing market. In this context, the lending data of the Bank of England showed little easing in mortgage lending. On the contrary, net lending secured on dwellings rose to GBP 10.3 B in February compared to 9.5 B in January, and equal to the high set December 2006, while the number of mortgage approvals remained stable at 119K. Net consumer credit continues to bottom out following the slowdown since mid-2005 and rise by GBP 0.9 B compared to 1 B in the previous month.