Global Daily – Q2 payback in eurozone

by: Nick Kounis , Maritza Cabezas

In this publication: German and French industrial production weak in March…providing an early sign that Q2 GDP will slow sharply after Q1 surge. US job openings strong, but expected to slow down in the coming months. Labour market tightening cooling down a bit…as other indicators measuring jobs market dynamics lose some momentum.

 

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Industrial production data slump in Germany and France

Weak industrial production data in Germany and France in March provided an early sign that the eurozone economy slowed in Q2 after the surge in growth in Q1, which may itself be revised down. German industrial production fell by 1.3% mom following a 0.7% fall in February (revised from -0.5%). Although factory orders, which lead production, rose strongly in March, this follows weakness in previous months and the underlying trend is one of rather modest growth (orders were up by 0.6%in Q1).

 

Meanwhile, French industrial production declined by 0.3% mom after a 1.3% fall in February (revised from -1%). Trends in the less volatile manufacturing sector were softer still (-0.9% following -1.4%). We think the eurozone economy remains on a modest recovery trajectory, which is unlikely to boost underlying inflationary pressures any time soon.

11 May

US job openings strong, but historically are lagging nonfarm payrolls

The US Job Openings and Labour Turnover Survey (JOLTS), which is watched as a complementary measure of the labour slack in the economy showed job openings surging to 5.8 mn in March, up from the revised February level of 5.6 mn. The 149k increase, which was led by better labour demand in the service sector, brought job openings to the second highest level on record since the JOLTS data were first published in 2000. However, historically job openings tend to lag nonfarm payrolls. It’s likely that job openings may slow in the coming time, in line with an economy growing at a softer pace (see chart above).

 

Hiring and separations, indicators of labour market dynamics, slow

On top of this, in the same report, other indicators, which measure the dynamics in the labour market slowed in March. Hiring declined to 5.3 mn (previous: 5.5 mn), and the hires rate fell to 3.7% (previous: 3.8%). Elsewhere, the quits rate – one metric of labour market confidence – was unchanged on the month at 2.1%, while the total separations rate fell to 3.5% (previous: 3.6%). Combining these data with the jobs market report from the Bureau of Labor Statistics suggest that the labour market is less strong than in the past year, when hiring and separations for instance, where clearly pointing to less slack in the labour market. We expect job growth to moderate this year.