US, UK economies shrink less than expected

The second quarter Gross Domestic Product (GDP) figures of the US and the UK were the main focus of attention among all economic indicators released last week.

In the US, the economy shrank less than expected in the second quarter as GDP fell at an annual rate of one per cent, unchanged from last month's estimate. Economists had anticipated a 1.5% drop after a 6.4% collapse in the first quarter.

A separate report from the Labour Department showed the number of US workers filing new claims for jobless benefits fell by 10,000 to 570,000 last week.

Meanwhile, the Philadelphia Fed index, which gauges factory activity in the US Mid-Atlantic region, has increased to 4.2% in August from July's -7.2%. This was the first positive reading since September 2008 and the highest level recorded from November 2007.

In the UK, the economy shrank by 0.7% in the second quarter, slightly less than the 0.8% expected by analysts. Despite this relatively positive data, this increases the annual GDP drop to 5.5%, which is the sharpest fall since records began in 1955.

However, in the UK housing market, house prices rose for the fourth consecutive month and registered their fastest monthly increase in two-and-a-half years during August. The Nationwide Building Society reported that house prices rose by 1.6% this month after increasing 1.4% during July.

In the 16-country member eurozone, the Markit's Composite Managers Index (PMI), which combines activity in both the dominant services and manufacturing sectors, increased to touch the expansionary 50 mark in August, from its July reading of 47. This was well above the 48 mark expected by economists. Moreover, activity in the services sector in the eurozone's two largest economies, Germany and France, also grew for the first time since last year.

Meanwhile, industrial new orders also rebounded as orders rose by 3.1% in June over the previous month.

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