The figures for the first full week of the New Year threw a couple of unpleasant surprises that don´t fit in with the overall trend. We have no doubt that the global economy is gaining traction, that economic growth is more likely to end up higher rather than lower, and that we've embarked on a period when projections for 2014 and 2015 are more likely to be revised upwards.
An optimist like me always runs the risk of dismissing disappointing figures as outliers or one-offs, but it's a risk I'm happy to take this time.
Han de Jong Chief Economist
Poor weather affects American jobs figures
In the United States, official employment data for December revealed an increase in new jobs of only 74,000, way below analyst forecasts and not exactly what we’d been looking for: we want better numbers not worse. An optimist like me always runs the risk of dismissing disappointing figures as outliers or one-offs, but it's a risk I'm happy to take this time.
My reasons? The December jobs number was completely at odds with other figures for the US economy, from the ADP employment report to leading confidence indicators. Statisticians claim the poor weather is to blame for the disappointing new jobs figure and that it would have been much closer to the expected 200,000 if it hadn't been so dreadfully cold. It makes you wonder why no economist projections factored in weather conditions: a Bloomberg survey of around 100,000 economists found 100,000 new jobs as the lowest prediction. The ADP employment report released a few days earlier puts the figure at plus 238,000 private sector jobs, so why the official jobs numbers were so depressed by the weather – and the ADP report wasn't – is a mystery to me. Neither do I understand why the cold spell didn’t impact the number of unemployment applications. Business climate surveys have been encouraging lately, pointing to a steady if less than spectacular improvement in the labour market. Having weighed up all the factors, we have to conclude that the December figure must be plain wrong and I expect to see it revised soon. If it's really such a decisive factor, it's worth noting that the US cold snap might be felt in the numbers for January as well – to be published in February.
Other data from the United States were generally favourable. The trade deficit came down steeply in November and hasn't been this low since 2009 – and the 2009 number was recession-related. In dollar terms, the deficit hasn’t been this low since 2002, and if it's measured as a percentage of GDP we have to go back even further. The small trade deficit definitely contributed to GDP growth in the fourth quarter.
Encouraging figures in the eurozone
In Europe, most of last week’s figures were positive, and retail sales in the eurozone recorded an uptick in November. Retail sales typically fluctuate a lot and we'd be well advised to tread with caution. But still, the year-on-year increase hasn’t been this marked since 2010, while we have to look back to 2007 to find a longer stretch of growth figures than that seen in November.
The European Commission’s European Sentiment Indicator, which measures both consumer confidence and business confidence in various sectors, recorded its eighth increase in a row in December. In Spain, in particular, confidence is growing – a trend that we’d like to see continue.
German manufacturing did well in November, in terms of both orders and output, confirming our general view that manufacturing regained some momentum at the end of last year – even if world trade figures have so far only recorded a modest improvement. A number of leading indicators are pointing to accelerating growth – which should boost production if and when it materialises.
Japan's leading indicators also exceeded expectations and the economy appears to be gaining traction – hopefully not to grind to a shuddering halt when VAT is raised in April of this year.