US productivity and output fall

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Americas

US

The productivity of the US workforce dropped along with the economy’s output in the first three months of the year.

A measure of employee output fell 1.7 per cent in the first quarter, according to a report from the Labor Department, steeper than the 1.2 per cent decline economists had forecast.

Productivity – a key input for companies when weighing hiring plans – climbed during the final three quarters of 2013.

Meanwhile, mortgage applications climbed 5.3 per cent last week, according to the latest index from the Mortgage Bankers Association (MBA), snapping two weeks of declines.

It was applications for loans to buy homes that drove the overall index, with demand rising 9 per cent, according to the MBA. Applications to refinance existing mortgages climbed a more modest 2 per cent.

The health of America’s housing market is drawing increased scrutiny as it is an area of the economy that is taking longer to emerge from the winter slump that gripped the US economy.

Europe

UK

The UK’s car industry trade body has jacked up its 2014 sales estimate to more than 2.4m cars, from 2.3m previously, after April sales rose 8.2 per cent -- the 26th straight month of increases, as Henry Foy reports.

British car buyers have been the darling of the European car industry over the past two years, as the market swells in contrast to shrinking sales on the continent. So far this year UK car sales are up 12.5 per cent on 2013.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, which collates the data, said: “This marks 26 consecutive months of growth as GDP continues to pick up, inflation falls and wage levels improve

“As UK economic confidence improves still further and the market continues its upward trend, we have revised our 2014 forecast up from 2.3 million to over 2.4 million registrations. This represents an increase of more than 6% versus last year.”

Asia Pacific

China

Businesses in China’s services industries grew at a slower rate in April than in March, according to HSBC’s purchasing managers’ index and highlighting the government’s challenge to rebalance the slowing economy away from credit-fuelled investment and towards consumption.

The PMI slipped to a reading of 51.4 in April, from 51.9 in March.

In the survey, any score above 50 indicates expansion.

The survey carried out by HSBC and data-gathering partner Markit polls managers in industries such as hotels, catering and telecommunications on topics including new orders and hiring.

HSBC economist Qu Hongbin said the survey showed service sector employment at its lowest in seven months, with this sub-index just above the 50 mark.

He added that the services sector was “not expanding at a fast enough pace” to offset what a separate HSBC survey has identified as China’s ongoing manufacturing slowdown (official data tells a more positive story).

Successive Beijing administrations have aimed for China to derive more of its growth from consumer spending instead of government investment in new infrastructure.

But without much of a welfare system, and due to the one-child policy that prompts young people to stash money away to care for ageing parents, China continues to have the world’s highest household savings rate, according to the World Bank.

Australia

Australian retail sales disappointed in March, though sales rose for an 11th consecutive month.

Retail sales expanded by 0.1 per cent in March, missing forecasts for spending to rise 0.4 per cent. The modest gain marks the slowest month of sales growth in the 11-month trend.

Consumers continued to spend at restaurants but pulled back their purchases on household goods and clothing.

Revisions were mixed. The gain in February was revised up to 0.3 per cent from 0.2 per cent, but January’s 1.2 per cent gain was dropped to 1.1 per cent.

Japan

Markit’s Japanese services index indicates April saw the biggest monthly contraction since September 2011, as firms report a slowdown linked to the rise in the national sales tax.

The monthly survey of the business activity in the services sector fell a sharp 5.8 points to 46.4 in April from 52.2 in March. A score below 50 indicates contraction.

Details weren’t encouraging, as new business declined for the first time in nine months.

A separate report on manufacturing also saw the first decline in output in 14 months, leading Markit’s “composite index” of the two sectors to slide to 46.3 from 52.8.

Amy Brownbill, economist at Markit, laid the blame on the sales tax, which on April 1 was increased from 5 to 8 per cent.

The implementation of the sales tax had a damaging effect on the business activity of Japanese service companies, with a solid fall in business activity . . .

Selling prices rose at a record pace, with a number of panellists commenting on the increase in sales tax as the main contributor.

The good news: the effect of the tax rate looks to be temporary, as business expectations for the coming 12 months ticked up to its highest level since September.

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