Q2 GDP of US, UK revised

On Friday, the US Commerce Department reduced its flash estimate of second-quarter growth to 1.6%, lower from the initial estimate of 2.4%, but higher than the 1.3% expectations.

Durable goods orders were also much weaker than expected, registered a 0.3% gain in July, while orders excluding transport sector, fell 3.8%. The latest jobless claims data was slightly better than expected with a fall to 473,000 in the latest week from a revised 504,000 previously.

Housing data was substantially weaker than expected with existing home sales falling 27% to an annual rate of 3.83 million. New home sales also fell 12.4% in July to a record low annualised rate of 276,000. Although a sharp fall was expected following the end of tax credits, the drop increased fears that the US economy will slide back towards into recession and prompt more aggressive quantitative easing by the Federal Reserve.

Meanwhile, in the UK, economic growth for the second half of the year was upwardly revised to 1.2% from the previous estimate of 1.1%. This was mainly attributed to an upward revision of the growth rate in the construction sector.

Last week was light in terms of economic data. Retail sales as reported by the Confederation of British Industry rose to a reading of 35 this month. This was higher than the 33 in July and the level of 18 expected by several analysts.

In the 16-nation euro area, the flash estimates of the Purchasing Managers’ Indices (PMI) for the main economic sectors indicated that the recovery is moderating. In fact, the services sector PMI slipped to 55.6 this month from 55.8 in July. The EU-16 manufacturing sector, which drove most of the growth in the third quarter of last year, also saw the pace of growth slow as the index fell to 55.0 from 56.7 in July.

These readings were both below analysts’ forecasts. In fact, industrial orders data in June showed that growth slowed to 2.5%, from a 4.1% increase in May. However, this was higher than the 1.5% rise expected. On an annual basis, industrial orders increased 22.6% in June.

Meanwhile, consumer confidence unexpectedly improved this month, as economic growth rose by the fastest pace in four years during the second quarter of the year. In fact, a measure of consumer confidence in the euro area improved to -12 from -14 in July. Economists were expecting the index to remain unchanged this month.

This article has been prepared by Bank of Valletta plc for your general information only.