A sharp rise in British retail sales pierced the global economic gloom like a rare shaft of sunlight on Thursday, but other developments showed that hopes that storm clouds would disperse were premature.
A Reuters survey said business pessimism was spreading in Japan, Italian data pointed to lengthening jobless queues, and the Swiss National Bank, which kept its key interest rate on hold, confirmed it expected economic growth to slow. News of a 3.5 percent rise in British shop sales in May, the sharpest month-on-month increase since the data series began in 1986, came hours after Bank of England governor Mervyn King said the economy was slowing and needed to do so to cool inflation.
Record sales of food and clothing, probably boosted by sunny weather, pushed retail volumes up despite expectations of a 0.1 percent decline. "A big surprise," said Mark Miller, economist at HBOS. "It may very well be a weather-related issue for this particular month, but it's very difficult to see a strong trend in retail sales persisting throughout the year."
The news contrasted with King's speech on Wednesday evening when he told bankers the City of London business district: "We believe that a slowdown in the economy this year, creating a margin of spare capacity, will be necessary to dampen price and wage pressures."
The retail sales figures also contradicted a succession of gloomy data from around the world. A Reuters survey in Japan showed business pessimism is spreading from manufacturers to the service sector, reflecting weak domestic demand and the impact of rising prices for raw materials.
The monthly tankan, designed to track the Bank of Japan's influential quarterly tankan report, showed sentiment among Japanese manufacturers remained negative, stuck at a five-year low in June. Non-manufacturing sentiment turned negative for the first time in more than four years. "Confidence is low among both manufacturers and non-manufacturers, so it shows the economy is declining more widely," said Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute.
Bank of Japan Governor Masaaki Shirakawa reiterated the central bank's view on Thursday that Japan's economy was slowing due to the impact of rising energy and raw material prices. "In this situation where uncertainty is extremely high, the BOJ will flexibly conduct policy by assessing risk factors," Shirakawa said in a speech at a meeting of Japanese credit associations.
ITALIAN JOB LOSSES: Back in Europe, the gloomy news was headed by jobless data from Italy, the eurozone's third largest economy. Unemployment there hit a seasonally adjusted 6.5 percent in the first quarter, above all forecasts in a Reuters poll and the highest rate since the third quarter of 2006, statistics office ISTAT reported.
The jobless rate for the previous quarter was revised up to 6.2 percent from 6.0 percent. "This is very, very bad data and it's even worse than it may seem," said Deutsche Bank economist Susana Garcia.
"It bucks a trend which normally sees unemployment fall significantly in the first quarter. This tells us the economy is doing very badly indeed." Meanwhile in Switzerland, the central bank held interest rates steady, keeping its target for the 3-month Swiss franc LIBOR at 2.75 percent.
It predicted economic growth would slow to between 1.5 and 2.0 percent from 3.1 percent last year, keeping its March forecast unchanged, but raised its inflation forecast for 2008 to 2.7 percent from 2.0 percent. Swiss National Bank chairman Jean-Pierre Roth, explaining its rates decision spoke of "the prevailing uncertainty as regards both the global economy - which could suffer a greater-than-expected slowdown - and the fallout from the international financial turmoil."
Publication at 1400 GMT of US leading economic indicators for May and at 1230 GMT of latest weekly jobless claims numbers will provide further insight into the strength of the global economy. The leading indicators index rose just 0.1 percent in April after declining for five months in a row. In May it is expected to show no change from the previous month.
Comments
Comments are closed.