FXT Economic Data Summary (Asia-Pacific | 09/16)

UK Hiring Demand Continues to Weaken

The UK labor market continued to soften. Preliminary HMRC data showed payroll employment fell by 26,000 in August, while Julys decline was revised from 13,000 to 19,000. Payrolls were down 145,000 from a year earlier. The claimant count rose to 1.692 million, while job vacancies fell from 710,000 to 702,000 between June and August, reaching their lowest level since 2014 outside the pandemic period and pointing to weaker hiring demand.

In the three months to July, the employment rate held at 75.1%, while unemployment remained at 4.9%, slightly below the 5.0% forecast. Economic inactivity edged down from 21.0% to 20.9%. Regular earnings rose 3.5% year on year, while total pay growth slowed from 4.2% to 3.9%. Regular pay increased 2.9% in the private sector and 6.3% in the public sector. FXT believes the UK labor market and hiring activity have clearly cooled, but wage adjustments are lagging and may take longer to reflect weaker employment conditions.

Eurozone Trade Conditions Improve

Eurozone trade strengthened in July. The seasonally adjusted trade surplus widened from a revised €1 billion to €5 billion, above the €2.5 billion forecast. Exports rose 1.2% to €260.8 billion, while imports fell 0.4% to €255.7 billion. The EU trade deficit also narrowed from €5.9 billion to €1.4 billion, indicating an improvement in monthly trade conditions.

However, the year-to-date picture remained weaker. The Eurozone‘s trade surplus from January to July fell sharply from €92.8 billion a year earlier to €17 billion, as imports increased 5.8% while exports grew just 1.2%. The EU shifted from an €84 billion surplus to a €13.8 billion deficit, with wider energy and China trade deficits and a smaller surplus in machinery and vehicles. FXT believes July’s improvement was largely a short-term recovery, while faster import growth and elevated energy costs continue to limit trades contribution to the European economy.

German Economic Conditions Gradually Improve

Germanys ZEW Economic Sentiment Index edged up from 34.2 to 34.7 in September, well below the 42.5 forecast, while the Current Situation Index improved from -61.1 to -47.1, beating expectations of -53.0. Fiscal measures and exports provided some support, with confidence improving in insurance and banking, while steel, metals and autos remained weak. High energy prices and geopolitical risks continued to weigh on expectations.

For the Eurozone, the Current Situation Index improved from -21.5 to -13.9, but Economic Sentiment fell from 31.4 to 25.8, far below the 39.5 forecast. Current conditions showed signs of stabilization, but expectations for future growth became more cautious. FXT believes Europe is gradually recovering from low levels, though improving conditions have yet to translate into stronger confidence, with industrial weakness and external risks remaining key constraints.

Canadian Wholesale Sales Beat Expectations

Canadian wholesale sales rose 0.3% month on month to C$93.09 billion in July on a seasonally adjusted basis, beating the earlier estimate for a 0.6% decline, following a 2.8% increase in June. Sales were up 7.9% year on year. However, wholesale volumes fell 0.6% on the month and rose only 1.8% annually, suggesting that part of the nominal increase reflected higher prices.

Three of seven wholesale sectors recorded gains, led by building materials and supplies, supported by stronger metal service centre sales and higher steel prices. Meanwhile, manufacturing shipments and wholesale volumes both declined, pointing to some pressure at the start of the third quarter. FXT believes wholesale sales remain positive, but weaker volumes suggest underlying demand is still soft, making consumer and business demand important indicators to watch.

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