According to a preliminary flash estimate from Eurostat, seasonally adjusted GDP rose by 0.6 percent in both the 19 euro area countries as well as in the EU28 in the second quarter of 2017. The 0.6% rise compared with the previous quarter marks the strongest increase in total output since the first quarter of 2015.
Annual growth was estimated at 2.1%, a positive sign of Eurozone economic recovery.
Source: Eurostat
"Virginia experienced an acceleration in Total Nonfarm Employment growth in the latter part of the 2nd quarter of 2017. Although the state continued to trail the national average for year-over-year employment growth in the first two months of the quarter, in June it pulled even with the national trend for the first time since May 2016. Much of that uptick was driven by Virginia’s above average performance in Education and Health Services; Financial Activities; Leisure and Hospitality; Transportation and Utilities; and Wholesale Trade. In addition, yearover-year employment growth in Virginia’s largest employment sector – Professional and Business Services – pulled even with the national trend in May 2017 for the first time since May 2016. However, below average performance in four sectors – Construction; Information; Retail Trade; and Total Government – is placing downward pressure on Virginia’s overall employment trajectory." See our second quarter report for the Virginia Chamber of Commerce.
According to a flash estimate from Eurostat, annual inflation in the euro area is expected to remain stable at 1.3% in July 2017.
Underlying inflation however is expected to increase for the second consecutive month. Excluding energy, food, alcohol and tobacco from the readings, inflation is expected to creep up to 1.2%, a 0.1% increase from 1.1% in June and potentially the strongest reading so far in 2017.
Energy is expected to experience the highest inflation (an estimated 2.2% in July up from 1.9% in June) while inflation in the services sector is expected to drop slightly to 1.5% (compared with 1.6% in June). Food, alcohol and tobacco are expected to remain stable at 1.4% and the inflation rate for non-energy industrial goods is anticipated to rise slightly to 0.5% (up from 0.4% in June).
Source: Eurostat
According to the latest report from Eurostat, the industrial sector in the euro area gained momentum in May with production increasing by 1.3% from the previous month. This reading marked the third increase in three months, the best performance since November 2016.
Annual growth rose from 1.2 percent to 4.0 percent, marking the strongest growth since August 2011.
The increase was attributed to a 2.3 percent growth in capital goods, the driving force behind May’s impressive numbers. Durable consumer goods and non-durable consumer goods also increased at 1.8 and 1.2 percent while intermediates grew at a slight 0.3 percent.
Broken down by country, the big four (France, Germany, Italy, and Spain) all enjoyed an increase in output. France experienced the strongest industrial sector growth with a 1.9 percent increase. Spain experienced the second highest growth with an increase of 1.6 percent, followed by Germany (1.4 percent increase) and Italy (0.7 percent increase).
The number of Americans filing for unemployment fell last week, marking the first decrease in a month. According to the latest statistics from U.S. Labor Department, jobless claims fell by 3,000 to 247,000 for the week ending in July 8. The 4-week average increased slightly to 1.949 million.
The unemployment rate for insured workers remains unchanged at 1.4 percent.
In total, the report signaled a strong demand for labor in the United States.
According to the June 2017 Employment Situation release by the US Department of Labor, employment is rising while hourly earnings are flat lining.
US hiring hit its strongest pace since February, with 222,000 new jobs added in the month of June. The leap in new jobs was led by the service sector, with professional and business services growing by 35,000. Government jobs also grew at a solid pace after a previous period of uneven results, increasing by 35,000.
Hours increased to an overall level of 34.5 weekly hours coupled with a slight 0.1 percent increase in unemployment. However, despite the increase, unemployment remained relatively low at 4.4 percent with the number of available workers also decreasing to 12.4 million.
In contrast, earnings only increased by 0.2 percent from the previous month, with a weak yearly growth of 2.5 percent.
According to June PMI data from BME and IHS Markit, the German manufacturing sector is continuing to grow at the strongest rate in over six years. The PMI rose to 59.6 up from 59.5 in May, reaching a 74 month high.
The rising index reflected a large increase in new orders as well as a lengthening in supplier delivery times. German manufacturers experienced the fastest growth in new orders since March 2011, marking the sixth acceleration in seven months. Purchasing activity also rose sharply in June, placing higher demands on suppliers and leading to the greatest lengthening of delivery times since April 2011.
Average input costs continued to increase in June as a result of high prices for raw materials. However, while output inflation quickened to the second fastest rate since July 2011, the total inflation rate continued to decline to a 7 month low.
In total, the report highlights the current strength of the German manufacturing sector and suggests that manufacturing will continue to act as a positive force in second quarter German GDP.
The U.S. economy slowed less than initially anticipated, according to Thursday’s third GDP estimate released by the Bureau of Economic Analysis. In this final estimate, GDP increased at an annual rate of 1.4 percent in the first quarter, an upward revision from previous estimates of 1.2 and 0.7 percent.
The upward revision was due mostly to a change in reported levels of consumer spending. Accounting for more than two thirds of economic activity in the U.S., consumer spending grew at a rate of 1.1 percent. This marks the weakest consumer showing in four years, but the final growth rate is almost double the initial estimate of 0.6 percent.
The final estimate also reflected positive contributions from nonresidential fixed investment, exports, PCE and residential fixed investment. These positive forces were somewhat offset by negative contributions from private inventory investment, federal government spending, and state and local government spending leading to a tepid, though stronger than anticipated level of growth in the first quarter.
According to the most recent survey from the Munich-based Ifo Institute, business sentiment has reached increasingly high levels in Germany. The Business Climate Index rose to 115.1 points in June 2017 from a previous level of 114.6 points in May. The increase points to a high level of satisfaction among German businesses regarding the country’s current business climate as well as a strong level of optimism for the future.
In the manufacturing sector, the index rose slightly as assessments of the current business situation remained relatively stable at a high level.
In the wholesaling sector, the index rose for the third month in a row. June’s reading marks the highest level since December 2010.
The index most notably improved in the retail sector, showing a high level of optimism about the short term business outlook among German retailers.
The index declined for the construction sector as contractors marginally decreased their assessments of both the current business situation as well as their expectations for the future.
In total, June’s reading reflects the strong performance of the German economy this quarter.
Often seen as a marker for business investment, U.S. durable goods orders fell for the second month in May 2017. According to a report by the U.S. Commerce Department, durable goods (items meant to last a minimum of three years) fell 1.1 percent between April and May, dropping to $228.2 billion.
May’s decline marks the largest drop in six months and is greatly attributed to a decrease in orders for aircraft. While previously a strength, aircraft orders have declined for the second time in two months with a 12 percent decrease in orders for commercial aircraft and a 31 percent decrease in orders for defense aircraft, a notoriously volatile category.
Core capital goods were another area of weakness in May with an unexpected 0.2 decline in both orders and shipments for this category.
In contrast, there was a 0.6 percent increase in machine orders, a 1.2 percent increase in vehicle orders, and a 0.8 percent gain in total shipments.
Excluding the category of transportation (which does not include aircraft), durable goods orders also rose very slightly, increasing by 0.1 percent/
While not completely negative, May’s readings point to a lack of confidence in business prospects in the United States.
