NEWS / Foreign Exchange

US: Initial claims surge, while Philly Fed turns in weaker

Initial claims rose unexpectedly by 28 000 to 337 000 in the most recent week, while continuing claims, reported with a one-week lag rose 19 000 to 2 534 000. The steep rise is puzzling. It might be due to a difficult seasonal adjustment or it might be the long awaited softening in the claims figures that started. Indeed, in recent weeks claims remained at very low levels despite signs of an economic slowdown. One week makes no trend, but if next week??™s data wouldn??™t show an improvement, it might influence the Fed??™s decision on rates.

Leading indicators rose by 0.3% M/M in September, following a downwardly revised 0.8% M/M drop in August.

The Philly Fed general business activity index fell to 6.8 in October from 10.9 in September, close to expectations and suggesting only a marginal slowing in activity in the cyclical manufacturing sector. However, this is a bit misleading as the components (that are not compiled into a composite index like the ISM for example) were often quite weak. Shipments fell to -4.1 in October, down 21 points and inventories shed 19 points to -15. New orders held narrowly into positive territory but shed nevertheless 12.4 points to a low 2.1, the lowest in seven years. Unfilled orders fropped to -8.2 from -1 in September. On the positive side, supplier deliveries rose to 0.9 from -6.1 and employment indices were mixed. Employment index was up to 12.6 from 7.5 but the workweek down to 5.1 from 11.9. Both price indices rose. A special question was asked about whether recent chances in financial conditions had affected investment plans over the next 6 to 12 months. About 66% said no revisions in plans, but 12% indicated a substantial downward revision and an additional 13% a small downward revision, while only 1% expected a substantial upward revision.

Others: UK retail sales growth continues to surprise on the upside

In September, UK retail sales growth surprised on the upside rising 0.6% M/M and 6.3% Y/Y, the highest annual growth figure since September 2004. Also the underlying trend remained firm, as the sales volume in the three months July to September increased by 1.7% compared with the previous three months. The report will support the hawks within the MPC that it??™s too early to cut rates.