Weekly economic review

Eurozone industries expand, US housebuilding stagnant

Economic data from the three main economic regions over the past week was a reminder that economic recovery in the developed world will not follow a smooth path but will face various headwinds.

Europe's manufacturing expanded for the first time in 17 months and service industries grew faster in October. The Purchasing Manager Index for the manufacturing sector rose to 50.7 this month from 49.3 in September while the services rose to 52.3 from 50.9. Meanwhile, Eurozone exports fell sharply by 5.8% in August from the month before, while imports eased by 1.3%. In the US, housing data was weaker than expected, with both building permits and housing starts for September falling from the previous month and well below expectations of an increase. This suggests that homebuilding in the US is still barely moving and the number of interested buyers is falling again now that it is too late to close a deal on a house purchase for first-time buyers before the tax credit expires.

Perhaps the worst news last week was the contraction in the UK's preliminary Gross Domestic Product for the third quarter. The economy shrank 0.4% during the period, against an expected 0.2% rise. The fall in GDP made this recession officially the longest since 1955, when records first started.

This was particularly disappointing in light of the weak sterling and the failure of manufacturing to recover more strongly and provide the necessary lift from the more competitive pricing. Also disappointing were retail sales for September which were unchanged month-on-month against an expected 0.5% increase.

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