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Markets News Monday: Eurozone retail sales fell less than expected in August; UK service sector in strongest rise in 2 years in September
By Finfacts Team
Oct 5, 2009 - 9:21:59 AM
Eurozone and EU 27 retail sales - - The Eurozone (EA16) includes Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland.
The EU27 includes Belgium (BE), Bulgaria (BG), the Czech Republic (CZ), Denmark (DK), Germany (DE), Estonia (EE), Ireland (IE), Greece (EL), Spain (ES), France (FR), Italy (IT), Cyprus (CY), Latvia (LV), Lithuania (LT), Luxembourg (LU), Hungary (HU), Malta (MT), the Netherlands (NL), Austria (AT), Poland (PL), Portugal (PT), Romania (RO), Slovenia (SI), Slovakia (SK), Finland (FI), Sweden (SE) and the United Kingdom (UK).
Eurozone
Eurozone retail sales fell in August less than analysts expected, while the service sector PMI (Purchasing Managers' Index) showed a return to growth for the first time in 16 months.
Retail sales in the 16 member country euro currency area fell 0.2% in August compared with July and was down 2.6%, the European Union statistics office Eurostat said today.
Sales fell 0.3% in the EU 27 in august and were down 1.8% year--on-year.
In August, “Food, drinks and tobacco” rose by 0.5% in the Eurozone and by 0.3% in the EU27. The non food sector fell by 0.6% in both zones.
Among the Member States for which data are available, total retail trade rose in four and fell in thirteen. The highest increases were observed in Poland (+1.5%) and Spain (+1.4%), and the largest decreases in Latvia (-3.3%), Sweden (-2.7%), Lithuania (-2.3%) and Austria (-2.0%).
Annual changes
In August 2009, compared with August 2008, “Food, drinks and tobacco” fell by 1.3% in the Eurozone and by 0.3% in the EU27. The non food sector declined by 3.2% and 2.1% respectively.
Among the Member States for which data are available, total retail trade rose in four and fell in thirteen. The highest increases were observed in Poland (+6.8%) and Austria (+1.3%), and the largest decreases in Latvia (-30.3%), Estonia (-20.6%), Lithuania (-20.3%) and Slovenia (-13.2%).
For more on Eurozone services PMI, see link in Box below.
UK service sector registered strongest rise in activity since September 2007
The recovery of the UK service sector retained momentum during September, with activity expanding at its fastest rate in two years as demand continued to improve. Moreover, growth is expected to be sustained, with the degree of confidence regarding the one-year activity outlook reaching a near two-and-a-half year peak.
However, there remained evidence of excess resources in the sector, with backlogs again reduced at a marked pace. This contributed to a seventeenth successive monthly decline in employee numbers during September.
The headline index from the report – the seasonally adjusted CIPS/Markit Business Activity Index, which is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago – posted a reading of 55.3, up from 54.1 in the previous month. Growth has now been sustained for five successive survey periods, and was at its highest for two years in September.
Markit Economics said over Q3 as a whole, the index has averaged 54.2, the best performance over a quarter since Q3 2007. Supporting the robust growth of service sector output was a third successive monthly rise of incoming new business, which grew in September at the strongest pace for nineteen months. Companies reported that the economic climate had improved, with demand for services rising in line with higher client confidence. Growth was particularly strong in the key Business-to-Business Services category.
Dr. Doom: US Unemployment Will Rise in 2010
HSBC chief fears a second downturn
The Financial Times reported today that Michael Geoghegan, chief executive of HSBC, is so convinced there will be a second downturn in the coming months that he plans to delay any rush to expand the bank.
“Is this a V recovery or a W?” Geoghegan asked in an interview with the FT.“[I think] it’s the latter. [If I’m right], we have to be very careful we don’t grow the balance sheet so far before the recovery has come only to write it back into the impairment line later on. I’m cautious about growing too fast.”
At the same time, Nani Beccalli – head of GE International, who runs the conglomerate’s businesses outside the US - - said he was worried that talk of governments preparing exit strategies from the huge amount of cash they have poured into their economies was“premature.”
RaboDirect enters Irish pensions market
RaboDirect has entered the Irish pensions market with the launch of an online PRSA Pension product provided by Zurich Life.
The bank, which has a Dutch parent, said the PRSA represents among the best value in the market with upfront costs on contributions significantly lower than other providers. For those signing up in 2009, upfront costs will be capped at 2%, and this will be reflected in all additional contributions made thereafter. This compares to an industry standard of 5%. The annual management fee for the fund is 1%, and there are no charges incurred for terminating the PRSA/transferring funds or suspending/varying contributions.
Dr. Doom
Bloomberg reports that New York University Professor Nouriel Roubini, who predicted the financial crisis, said stock and commodity markets may drop in coming months as the gradual pace of the economic recovery disappoints investors.
“Markets have gone up too much, too soon, too fast,”Roubini said in an interview in Istanbul on Oct. 3.“I see the risk of a correction, especially when the markets now realize that the recovery is not rapid and V-shaped, but more like U- shaped. That might be in the fourth quarter or the first quarter of next year.”
“This bear market rally we’ve had since March is coming to an end,” Richard Suttmeier from ValuEngine.com told CNBC Monday. He said by mid-October there will be the return to the “multi-year bear market that began two years ago.” He also said we will not see a bull market until stocks are cheap again noting that “five out of nine sectors are extremely over-valued.”
Asia
The MSCI Asia Pacific Index declined 0.8% Monday.
Japan's Nikkei 225 dipped 0.6%; India's BSE Sensex 30 declined 1.6%; Chin was closed for public holidays.
Gold is trading at $1,003.80 up $1.50 from Friday's spot price close in New York.
Davy's Barry Dixon comments: Lisbon ratification completes two out of three important milestones for the Irish economy - -"The resounding ratification of the Lisbon treaty by the Irish electorate on Friday October 2nd completes the second of three key milestones for the Irish economy this year. NAMA legislation has been introduced and is most likely to become law within the next month, while December's budget will set the tone for the Irish economy's competitiveness for the future.
On Friday, 67% of the electorate voted in favour of the Lisbon Treaty, a substantial increase from the 46% minority in the previous referendum. All but one constituency voted in favour of the treaty, quashing any fears of a protest or anti-government vote. The approval of the treaty removes any concern about Ireland's attitude or commitment to Europe and was broadly welcomed by many European leaders over the weekend.
With NAMA legislation likely to be enacted over the next month, focus will now shift to December's budget. The Exchequer Returns on Friday illustrate the unsustainable nature of the current situation – insufficient tax revenue to meet the current expenditure requirements. With increasing noise over the weekend from trade unions regarding the unacceptability of pay or job cuts in the public sector, this last hurdle in securing Ireland's economic future may prove the most difficult for the government."
Goodbody economist Deirdre Ryan comments: Dept of Finance forecasts wider budget deficit - - "Exchequer Returns numbers on Friday confirmed something we have been concerned about for some time – that this year’s tax take will be much lower than that laid out in government estimates. A total of €23.7bn has been collected in the first 9 months of the year, almost €1bn behind profile. On an annual basis, revenues are down 16%, (-17.6% yoy in August), as the annual comparisons are starting to become easier. After a number of months where the early payment of Corporation Tax had been flattering the revenue numbers (revenues had been €465m behind, or 2%, in August), this trend has now come to an end, with the total shortfall more than doubling in September compared with August. This is mainly due to the trends in VAT and Income Tax, two of the biggest revenue gatherers. Revenues from these two categories were over €200m behind expectations in September alone, while in the year so far, they are over €1.1bn behind profile. This does not bode well for November’s returns, a critical month for the Exchequer.
Given these trends, the Government stated on Friday that revenues for the full year will be €2bn short of the €34.4bn it forecast last April. As part of our economic forecast changes last week we nudged up our 2009 tax revenue estimate to €33.3bn from €32.4bn. It looks now as if our original estimate would have been closer to the mark. However, as we highlighted last week, the trends in the Live Register, where the rate of increase has moderated significantly, imply that the government may make up some of the shortfall in terms of lower expenditure, in particular in relation to social welfare spending.
Overall, total voted spending is down 1.3% yoy, with both current and capital spending coming in less than that profiled for the first 9 months of the year. Nevertheless, the benefits of lower social welfare spending will largely be felt next year. As such, given these revenue trends the Dept of Finance now estimates the General Government balance (GGB) will widen to -12% of GDP, compared to the -10.75% deficit in the April Budget and worse than our own -11.1% of GDP forecast. However, it is next year that is becoming the focus at this stage, with the Government’s GGB of -10.75% of GDP looking optimistic (we are on -11.4% of GDP). With Budget 2010 fast approaching, the need for further significant consolidation has become even more pressing."
