Aside from some unexpectedly upbeat news from manufacturers in the US and – to a lesser extent – China, this week saw the release of some truly awful economic data. Here’s the rundown.

United States

On Tuesday, the Institute for Supply Management’s (ISM) manufacturing index – an indicator of future activity – defied consensus expectations for a fall, rising to 54.8 in April from 53.4 in March. Any score above 50 indicates that expansion is likely in the sector.

But ISM’s services index – which followed on Thursday – did not perform nearly as well, dropping to 53.5% in April from 56.0% in March, its worst reading since December. Worryingly, production, new orders and employment sub-indices all fell.

Reports focused on the country’s labour market were equally mixed. A private sector jobs report released on Wednesday showed that companies in the world’s largest economy added 119 000 workers in April, down from 201 000 in March and the fewest in seven months. But a report covering first time filings for jobless benefits showed surprising strength.

On Thursday, US labour department data showed that the number of Americans who applied for jobless benefits fell last week for the first time in a month. Jobless claims declined by 27 000 to a seasonally adjusted 365 000 in the week ended 28 April. This level is slightly above a four-year low.

Finally, earlier this afternoon, the government’s closely watched employment situation report showed that America’s economy added 115 000 jobs in April, far below market expectations. Friday’s report market the second month in a row of hugely disappointing numbers in America’s labour market.

The increase in employment in March was, however, revised upwards to 154 000 from an initial reading of 120 000. The same report showed that the country’s unemployment rate fell from 8.2% to 8.1% as nearly 350 000 workers dropped out of the jobs market.


This was a terrible weak for Europe. Data released on Tuesday showed that the eurozone’s unemployment rate rose for the eleventh month in a row to 10.9% in March. Roughly 17.4-million people were jobless in the 17-member currency bloc, a report from the European Union’s statistics office showed, 1.73-million more than at the same time last year.

The report highlighted a stark divergence in fortunes between the northern and southern portions of the continent. Germany clocked in a 5.6% jobless rate – a surprise increase from the previous month’s figures – but a mere fraction of the 24.1% rate reported for Spain or Greece’s 21.7% figure. In both of these debt-laden, economically struggling countries, more than half of those under 25 years old are now unemployed.

Europe’s latest employment numbers are symptomatic of a broad economic slowdown in the region that has already seen eight eurozone countries – including Spain and Greece – slip into recession. And the future is far from bright.

A series of European manufacturing purchasing managers’ indices (PMIs) – forward looking indicators of economic activity – tanked this week. Country readings fell in Germany, France, Italy, Spain, Ireland, England, Norway, Poland, the Czech Republic and Switzerland.

As a whole, the eurozone’s manufacturing PMI – already sitting below the 50.0 mark separating expansion from contraction – slipped further to a reading of 45.9 in April, its ninth consecutive monthly fall.

Despite the abundance of bad news, policymakers at the European Central Bank (ECB) took no action at their meeting in Barcelona this Thursday. At his post meeting press conference, ECB president Mario Draghi put the onus on governments, rather than the central bank, to address the continent’s economic woes.

“We have to put growth back at the centre of the agenda,” Draghi said.


Asia’s week began with the release of China’s official PMI numbers. The China Federation of Logistics and Purchasing (CFLP), which issues the data in conjunction with China’s National Bureau of Statistics, reported a slight rise in their index from 53.1 in March to 53.3 in April, its highest headline reading in more than a year.

These results supported the view among many economists that China’s economy – the world’s second largest – bottomed out in the first quarter of 2012. Growth slowed to 8.1% year on year during the December to March period, its slowest rate in three years. Other analysts, however, are less sanguine.

Final results from a separate, private sector PMI administered by HSBC were less optimistic. Although HSBC’s gauge rose – from 48.3 in March to 49.3 in April – it remained below the 50 mark separating expansion from contraction.

The divergence between these two measures is now nearly as wide as it has ever been. And in the past, CFLP’s index has tended to fall toward HSBC’s measure, not the other way round.

In Australia, the country’s central bank surprised markets with a 50 basis points cut to its key interest rate. With the exception of emergency cuts in the wake of Lehman Brothers’ collapse in 2008, this week’s action represented the largest rate cut by policymakers in more than 10 years.

A series of recent data releases have raised concerns about the state of Australia’s economy and this week was no exception. Data from the Australian Industry Group (AIG) showed that the country’s manufacturing PMI fell 5.6 index points to 43.9 in April. A separate release from the group showed that the country’s services PMI also plunged, from 47.0 in March to 39.6 in April.

Elsewhere in the region, official data showed a fall-off in industrial output and export volumes in South Korea, a slowdown in economic growth in Taiwan and rising joblessness in Singapore. All four reports were gloomier than consensus forecasts.

South Africa

On Monday, data from the South African Reserve Bank showed that private sector credit extension accelerated from 7.92% growth, year on year, in February to 9.16% growth in March. Credit extended to households rose by 6.8% and credit to businesses expanded by 12.2%.

In a research note following the report’s release, Nedbank economists wrote, “These figures suggest that credit extension is continuing to pick up momentum and point to an increased chance of some tightening in [monetary] policy.”

Also on Monday, official statistics showed that South Africa recorded a R5.5-billion trade deficit – the amount by which the value of imports exceeded exports – in March. For the first quarter of 2012 as a whole, the country recorded a R26.4-billion deficit, up from R12.9-billion in the final three months of 2011.

On Wednesday, South Africa’s PMI fell for the second month in a row, from 55.1 in March to 53.7 in April. In a written statement accompanying the data’s release, Abdul Davids, head of research at Kagiso Asset Management, indicated that the index could fall further.

The PMI leading indicator – new sales orders as a ratio of inventories – fell below 1.0 for the first time since December of 2011, indicating that manufacturers’ inventories are too high relative to demand. The index measuring expected business conditions over the next six months also fell. And the employment index came in at a reading of 48.8, signalling that the manufacturing sector is likely to continue to shed jobs in the months ahead.

Finally, on Thursday, the South African Chamber of Commerce and Industry (Sacci) reported that its business confidence index (BCI) fell a further 1.4 index points in April. Last month’s score of 94.3 was 8.2 points lower than the same month last year and the lowest index score recorded in three years.

In a statement accompanying the report’s release, Sacci wrote, “The current trend in the BCI that started in April 2011 can be ascribed to a deterioration in both the global and domestic business climates.”


  • Matt spends part of his weekends writing a weekly preview of the global economy for the Mail & Guardian and a detailed preview of Brazil, Russia, India, China and South Africa's outlook for The BRICS Post. During the week, he is a senior economist and head of sales for NKC Independent Economists. He also manages Exchange Data International's and Softek Computer Services' businesses in South Africa. Born and raised in the USA, he worked for the U.S. Treasury Department and Federal Reserve Bank of Boston before moving to Cape Town with his wife, Maya, and Jack Russell terrier, Hazel. They’ve since been joined by two sons, Sebastian and Gabriel, both born in the Mother City. Follow Matt on Twitter: @MattQuigley.


Matt Quigley

Matt spends part of his weekends writing a weekly preview of the global economy for the Mail & Guardian and a detailed preview of Brazil, Russia, India, China and South Africa's outlook for The BRICS...

Leave a comment