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European Unemployment Drops

Eurostat Reports Slight Advancement in Unemployment

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Euro Area unemployment declined to the lowest recorded value since 2011 when the sovereign debt crisis unfolded among European States after improvements occurred in most of the 19 countries in the economic bloc. Although an improvement, the latest results have not reduced speculation that the European Central Bank’s will opt to add more stimulus in March.

UK Construction Expansion Slows

Construction activity in the United Kingdom slowed notably during the first month of the year, with the Purchasing Managers’ Index reporting the lowest results since April of 2015. According to the release from Markit Economics, the Construction PMI printed at a value of 55.0 for January, down from December’s 57.8 and missing consensus expectations of 57.5. Builders experienced one of the weakest expansion periods in years after growth in new business showed considerable softness. Creeping economic uncertainty emerging in the last few months have seen contractors curb new orders amid a slowing demand growth. This is likely to be another contributor to a downgraded outlook from the Bank of England later in the week, with the Central Bank forecast to keep rates at a record low 0.50% where they have sat since 2009 in order to spur demand.

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Euro Unemployment Progresses

Unemployment in the Euro Area declined to a near a five year low for the month of January after the jobless rate fell to 10.40% compared to the 10.50% recorded back in December. This marks a dramatic improvement over levels reported a year earlier when unemployment stood at 11.40%. The best job creation results continue to come from core nation Germany where the measure currently stands at 4.50% in comparison to the highest unemployment rates in the region attributed to Greece at 24.50% and Spain at 20.80%. Spanish unemployment rose in January by 57,200 beating estimates of 71,200 while missing previous month’s decline of -55,800. Germany meanwhile reported a further advance in its own jobless rate to 2.70 million persons, down from December’s revised 2.80 million. The latest forecasts from the European Central Bank estimate that unemployment will average 10.50% this coming year before dropping to 10.10% by 2017.

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China Services on the Rise

In spite of the inherent growing pains, the transition of the Chinese economy from an export-oriented producer to a service provider is showing signs of progress as evidenced by the latest reports from Markit Economics. According to the Caixin Services Purchasing Manager’s Index, expansion surged to 52.4, the highest level since July 2015. The value surpassed both consensus estimates as well as the prior month’s figure of 50.5 and 50.2 respectively. Employment in new businesses climbed to the highest in 6-months, but the report highlighted that prices being charged have remained low for a 5th-straight month. Caixin Insight Group Chief Economist He Fan stated that the pace of the rise in the services sector is quite substantial, in some ways offsetting the ongoing manufacturing contraction that was reported at the outset of the week.

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Swiss Retail Sales Slump Persists

The Swiss Federal Statistical Office reported a continuation in the shrinking pace of consumption over 2015 in its latest retail figures. For the month of December, retail sales contracted an additional -1.60% after having declined by a revised -1.70% in the prior month while missing estimates of a slight improvement to -1.30%. This marks the 5th consecutive decline since retail sales showed expansion back in July. Excluding highly volatile items such as fuel, non-food products showed sustained declines after dropping by -2.30% whereas food products reported a slight increase to 0.10%. The biggest drag wias clothing and footwear sales which shrank by -9.30% amid warmer than anticipated weather conditions. The considerable strength of the Swiss Franc and clouded global economic outlook continued to weigh on retail as spending stalls. The Swiss Franc has continued to weaken over the Euro, reaching as high as 1.1127 in reaction to the announcement.

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