Stock Markets Take Fright From Weak U.S. Economic Data

By: Lloyds_TSB

Stock markets have taken fright at yesterday’s generally weakerthan- expected US economic data, with Treasuries moving higher. Final Q2 GDP figures showed a fairly benign 0.7% annualised pace of contraction against a consensus estimate of -1.2%. But the combination of a weak ADP and Chicago PMI report has cast fresh doubt on the sustainability of the US economic recovery, notwithstanding the noticeably firmer FOMC policy statement last week.

Alongside de-leveraging in the household sector, weak labour market conditions pose one of the biggest threats to consumer activity going forward. The ADP employment survey was not especially encouraging in this regard, with a fall of 254k in September against a consensus estimate of -200k. More often that not, the survey registers a bigger fall (or rise) compared with the corresponding non-farm payrolls data. So there may be scope for disappointment in Friday's employment report, where the consensus stands at -180k. In summary, there seems little room for complacency so early in the economic recovery process - a point made repeatedly by central banks.

Today’s economic data calendar is fairly busy. In the UK, the Bank of England's Q3 Credit Conditions Survey is published, where a further improvement in credit availability to both households and firms seems possible. In the US, September's ISM manufacturing survey is released, although there may be some downside risk to our forecast of 54.0 given yesterday's poor Chicago PMI survey. The euro-zone calendar is more limited, featuring final PMI manufacturing data.

For more information: Emile Abu-Shakra Manager, Media Relations Lloyds TSB Group Media Relations Tel 020 7356 1878 http://www.lloydstsbcorporatemarkets.com/

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.