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US unemployment claims drop as eurozone struggles continue
US unemployment claims fell sharply, while UK and Eurozone business activity faces continued contraction and uncertainty.
US unemployment claims fell by 15,000 to 227,000, beating expectations.
UK Composite PMI hit an 11-month low in October, signaling slowing business activity.
ECB’s Robert Holzmann suggests a 25bps rate cut in December is likely, with a 50bps cut less probable.
US jobless claims decline to three-week low
The number of Americans filing for unemployment benefits declined by 15,000 to 227,000 for the week ending October 19th, reaching the lowest level in three weeks. This figure significantly beat market expectations, which had predicted claims would remain steady at 242,000. The latest drop points to continued resilience in the US labor market, defying concerns about broader economic weakness.
UK business activity slows sharply amid mounting uncertainty
Business activity in the UK took a hit in October as both the manufacturing and services sectors showed signs of cooling. The Manufacturing PMI slipped to 50.3 from 51.5, the lowest in six months, while the Services PMI declined to 51.8 from 52.4, an 11-month low. This dragged the Composite PMI down to an 11-month low of 51.7 from 52.6. Experts attribute the slowdown to increasing political uncertainty, including concerns about the upcoming UK Budget and the geopolitical risks posed by conflicts in the Middle East, the Ukraine war, and upcoming US elections. These factors have weighed on business sentiment, causing a contraction in growth momentum.
ECB's Holzmann warns against too-aggressive rate cuts
European Central Bank Governing Council member Robert Holzmann downplayed the likelihood of a substantial 50-basis-point rate cut in December, suggesting that a more modest 25-basis-point reduction is "probable." Holzmann, known for his hawkish stance, warned that inflation could still surprise to the upside, making a cautious approach necessary. Although a larger cut remains within the realm of possibility, Holzmann expressed doubts that such a move would be warranted given the lingering inflationary pressures.
Eurozone activity shows mixed results, inflation persists
Economic signals from the Eurozone remain mixed, with manufacturing activity improving slightly, while the services sector lost some ground. The Manufacturing PMI edged up to 45.9 from 45.0, though it remains in contraction territory. Meanwhile, the Services PMI dipped slightly to 51.2 from 51.4, pushing the Composite PMI up marginally to 49.7, but still below the crucial 50-point threshold that indicates economic expansion. Persistent inflationary pressures, largely driven by rising wages, are constraining service providers and casting uncertainty on the ECB’s policy path.
The Eurozone economy contracted for a second consecutive month, with the manufacturing sector continuing to struggle despite small gains in services. While inflation has been slow to ease, the ECB may be leaning towards a smaller, 25bps rate cut in December, rather than the 50bps cut that some had anticipated.
