US data weaker than expected

In the US, economic data was weaker than expected, with jobless claims rising to 472,000 from an upwardly revised 459,000 the previous week. The Institute of Supply Management (ISM) index for the manufacturing sector in June fell to 56.2 from 59.7 the previous month. There was also a sharp 30% decline in pending home sales in May, with sales weakened by the ending of tax credits.

US consumer confidence data was significantly weaker than expected, falling to 52.9 in June from a revised 62.7 previously, as the expectations component weakened sharply while optimism surrounding the jobs market also faded. In fact, the ADP employment data was weaker than expected, with private sector payroll growth at 13,000 for June, compared with expectations of a figure near 60,000. The unemployment rate dropped to 9.5% in June from 9.7% in May. This is the lowest level since July 2009.

In the 16-nation eurozone, the flash estimate of inflation was lower than expected. The Consumer Price Index (CPI) fell to 1.4% on a year-on-year basis, down from 1.6% in May. Meanwhile, on a yearly basis, producer price inflation increased to 3.1% in May from 2.8% in April. In the manufacturing sector, the Purchasing Managers Index (PMI) came in at 55.6 in June.

European confidence in the economic outlook unexpectedly improved in June. An index of executive and consumer sentiment for the eurozone rose to 98.7 during the month. Unemployment held steady at 10% in May from a downwardly revised 10% in April. This is the highest in almost 12 years as the debt crisis made companies reluctant to add workers.

In the UK, the Purchasing Managers' Index (PMI) for the manufacturing sector edged lower to 57.5 in June from 58 in May, which will maintain expectations over a slowdown. This was the first decline in four months, as weaker demand in Europe hampered export order growth.

Meanwhile the PMI for the construction sector also fell to 58.4 in June from 58.5 in May. Business investment for the first quarter of the year rose 7.8% from the previous three months. From a year earlier, total business investment fell 7.7%.

On a positive note, net lending increased to £1.184 billion in May from an upward sharply revised £0.979bn in April. Consumer credit also increased more than expected in May to £331 million from a net repayment of £114m the previous month. Meanwhile, although mortgage approvals stalled in May at 49,815, credit card lending posted its weakest reading since September 2009.

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.