EUROPE AND the United States gave contrasting signals on the outlook for the global economy, with the euro zone showing strength and US reports reinforcing concerns about slower growth.
The euro zone’s private sector surged more than expected in July, data showed yesterday. New US claims for jobless benefits climbed more steeply than anticipated last week.
Another report showed US existing home sales fell to a three-month low in June – although the number was not as bad as analysts had expected – and the supply of unsold homes rose to its highest level in almost a year.
The data came a day after Federal Reserve chairman Ben Bernanke warned the US economic outlook was “unusually uncertain” and indicated further monetary easing might be necessary to support the world’s biggest economy.
“People have become somewhat adjusted to the jobless claims being surprisingly bad, but since early June we haven’t really had any bright spots in our data,” said Dan Cook, senior market analyst at IG Markets in Chicago.
The US economy resumed growth about a year ago, but high unemployment and recent weak data from manufacturing and other areas have raised concerns about a significant slowdown.
European purchasing manager’ indexes showed private-sector business activity accelerated in July, surprising economists who had expected a slowdown and indicating third-quarter euro-zone growth of around 0.6 - 0.7 per cent, analysts said.
That doubles forecasts in a Reuters poll last week for 0.3 per cent growth.
Markit’s Eurozone Flash Services PMI, made up of surveys of 2,000 businesses ranging from hotels to banks, jumped to 56.0 in July from 55.5 in June, easily outpacing expectations for 55.0 and beating out even the most optimistic forecast polled by Reuters for 55.5.
The euro zone’s manufacturing sector, which drove a large part of the economy’s return to growth in the third quarter of last year, also accelerated.
Also, figures showed consumer confidence in the euro zone climbed to a 26-month high in July.
But data earlier this month showed a euro-zone services PMI fell for the third time in four months, triggering concerns among analysts.
“My big issue is whether there will be a slowdown in the second half of the year and on the basis of what we are hearing from the US economy and signs of a cooling off in China, I think it is very likely we will see a slowdown,” Ken Wattret at BNP Paribas, said after yesterday’s data.
The US labor department report showed initial claims for state unemployment benefits rose 37,000 to a seasonally adjusted 464,000 in the week ended July 17, more than erasing a decline in the prior week. Analysts polled by Reuters had forecast claims rising to 445,000.
Last week’s jobless benefits data showed new claims fell to a near two-year low in the prior week, and US job growth has slowed after gains early in the year.
Also in the US, a report from the National Association of Realtors showed home sales fell 5.1 per cent to an annual unit rate of 5.37 million units. A report earlier this week showed new US home construction hit its lowest in eight months in June. A Reuters poll of more than 600 economists published last week suggested the world economy will cool a bit in the next few months as China and the US gear down.
But many major central banks have started looking at exit strategies from their loose monetary policies. Canada, Australia and India have already raised interest rates.
Mr Bernanke said on Wednesday the Fed stood ready to ease monetary policy further if the recovery falters, but also indicated the Fed does not expect the economy to stall, and does not foresee any extra policy measures being needed. – (Reuters)
