Eurozone sales plummet

Retail sales in the euro area fell sharply in April, dropping 1.2% compared with an upwardly revised 0.5% increase the previous month. This was the steepest fall since October 2008. Unemployment rose to a 10-year high of 10.1%.

The Purchasing Managers Index (PMI) for the manufacturing sector for May was revised down to 55.8 from the previous flash estimate of 55.9, and from 57.6 in April.

The PMI for the sector rose to 56.2 in May from 55.6 the previous month. This was the ninth month in a row that the reading was above 50, marking expansion in the sector. In the meantime, consumer price inflation increased at annual rate of 1.6% in May, up from 1.5% in April.

Underlying confidence in the eurozone remains very fragile, with fears of medium-term debt defaults by weaker member countries. In fact, the economic sentiment indicator dropped to 98.4 in May from 100.6 the previous month.

In the UK, the manufacturing PMI held steady at 58.0 for May, contrary to expectations of a fall. In the services sector, the PMI was little changed at 55.4 for May, from 55.3 the previous month. However, the new business component was at a nine-month low. The PMI for the construction sector rose to 58.5 in May from 58.2 the previous month.

In the housing sector, according to Nationwide, prices rose 0.5% in May from an upwardly revised 1.1% increase the previous month. On a yearly basis, the rate of increase fell to 9.8% in May from 10.5% the previous month. Also according to Nationwide, house prices on the index rose 12 times in the past 13 months.

Economic data in the US was generally positive, notably in the manufacturing sector. Orders for US-made factory goods increased by a seasonally adjusted 1.2% in April, led by a tripling in orders for civilian airplanes and parts. However, excluding transport goods, orders fell 0.5%.

The Institute of Supply Management (ISM) manufacturing index fell slightly to 59.7 for May from 60.4 the previous month, but this was slightly higher than expected. In the services sector, the ISM index was unchanged for the month at 55.4.

In the housing sector, pending home sales rose 6% in April after a revised 7.1% gain the previous month. In the labour market, non-farm payrolls expanded by a seasonally adjusted 431,000 in May, but virtually all the new employment were temporary jobs at the US census.

This article has been prepared by Bank of Valletta plc, which is licensed to conduct investment services business by the MFSA, for your general information only.