Fears rose for the strength of the global recovery, after jobs figures from the US capped off a week of alarming data.
The unemployment rate in the world's biggest economy climbed 0.1pc to 9.1 pc in May, while the number of jobs showed its smallest rise in eight months. Just 54,000 were added to payrolls for non-agricultural work - some 100,000 fewer than forecast.
The Dow Jones, the US benchmark share index, fell more than 140 points to just over 12,100 at one point as Wall Street digested the latest disappointment, while the dollar hit a record low against the Swiss franc, seen as a "safe haven" currency. However, the Dow recovered in late trading to 12,205.19 , down 43.36.
Investors had already seen a leading US manufacturing survey this week fall to its lowest level since September 2009 and a second credit rating agency threaten to put the country on review for a possible downgrade of its rating, unless politicians agree to raise its legal debt limit.
"The greater surprise is not the US slowdown was unexpected, but rather that it was so pervasive - reflected in housing, labour, manufacturing and consumer spending data," said Michael Woolfolk, managing director at BNY Mellon Global Markets.
Analysts have blamed the softness in the US economy on high energy prices, supply chain disruptions following the Japanese earthquake and tornadoes and flooding in some states.
Austan Goolsbee, US president Barack Obama's chief economist, told Bloomberg the jobs report marked a "little bump" in the road to recovery and warned against reading too much into one month's figures.
"Markets have been jittery for some weeks now amidst concerns about global growth, and the shortfalls seen in today's release are likely to exacerbate this - especially when looked at in conjunction with weak indicators elsewhere in the developed world," said Scott Corfe at the Centre for Economic and Business Research (CEBR). "The West looks set for a difficult year."
In line with this warning, analysts said data also out on Friday for the massive British services sector suggested that the UK's growth may have slowed in the second quarter of this year.
Activity in the sector grew at its slowest pace in three months in May, according to the closely-watched Markit/CIPS purchasing managers' index (PMI) which eased from 54.3 in April to 53.8 last month - the lowest reading since February and below forecasts of 54.1.
The slowdown was blamed on the sector's exposure to hard-pressed British consumers, who are seeing their incomes squeezed by higher transport and energy bills and are unwilling to finance their spending by increasing their debt.
With the full set of PMIs – for services, manufacturing and construction – now out for the first two months of the current quarter, the CEBR predicted the UK economy's growth rate from April to June will be lower than the 0.5pc seen in the previous quarter.
Economists again pushed back expectations of when interest rates will rise, judging that the recovery's fragility rules out a move any time soon.
However, the pound rose against a weak dollar, closing just over a quarter of a cent higher in London at $1.6362.
No comments:
Post a Comment