British economy 0.2% over recession, US unemployment claims down
The US unemployment rate decreased by 3,000 to 217,000 and UK’s monthly GDP away from recession by 0.2% in September, driven by increase in services output. Oil prices rose by 1.1% to $80.85 a barrel, but are on track for a third consecutive week of approximately 5% declines due to concerns over diminishing global demand and OPEC+ meeting.
Only a modest increase however
In the week ending November 4, seasonally adjusted initial unemployment claims in the U.S. decreased by 3,000 to 217,000, with a 4-week moving average of 212,250, reflecting a modest increase. The insured unemployment rate remained unchanged at 1.2%, with a total of 1,834,000 insured unemployed individuals, marking an increase of 22,000 from the previous week’s revised level. The unadjusted data indicated a 6.9% rise in actual initial claims to 213,132, exceeding the expected increase based on seasonal factors. The unadjusted insured unemployment rate held steady at 1.1%, with a total of 1,608,230 individuals claiming benefits, up by 33,753 from the prior week.
A labor market distortion can signal a recession
In terms of continued weeks claimed for benefits in all programs, there was an increase to 1,599,616, up by 1,962 from the previous week. No state triggered the Extended Benefits program during the week ending October 21. The report also highlighted variations in initial claims among states, with Michigan experiencing the largest increase, while New York saw the largest decrease. Notably, former Federal civilian employees and newly discharged veterans exhibited changes in both initial and continued weeks claimed. The highest insured unemployment rates were reported in California, Hawaii, and New Jersey.
No average growth across 3 months
The UK’s monthly real gross domestic product (GDP) in September 2023 is estimated to have increased by 0.2%, a slight uptick from the 0.1% growth reported in August 2023, which was revised down from the initially stated 0.2%. However, when examining the broader perspective, the GDP exhibited no growth in the three months leading up to September 2023.
Services helped avoid a recession
The growth in GDP for September was primarily driven by a 0.2% increase in services output, with notable contributions from professional, scientific, and technical activities, as well as human health and social work activities. This contrasts with the 0.3% growth in services output reported for August 2023, which was revised down from the initial 0.4%.
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Production without growth
In contrast, consumer-facing services experienced a decline of 0.2% in September 2023, following a 0.7% decrease in August 2023, revised down from the initially stated 0.6%. Production output showed no growth in September 2023 after a 0.5% decline in August, revised up from 0.7%.
The construction sector, after a fall of 0.8% in August 2023 (revised down from 0.5%), exhibited a 0.4% growth in September 2023. Overall, the report reflects mixed trends in different sectors, shaping the economic landscape for the specified period.
Price hike despite lower demand
Oil prices experienced an uptick on Friday, with Brent crude futures for January rising by 1.1% to $80.85 a barrel, and U.S. West Texas Intermediate (WTI) crude futures for December climbing 1% to $76.52. Despite this short-term increase, both contracts are on track to register a third consecutive week of approximately 5% declines, primarily influenced by concerns over diminishing global demand and anticipation surrounding the upcoming OPEC+ meeting.
A China recession can drag oil with it
The faltering demand is exemplified by weak economic data from China, a significant consumer of Saudi Arabian crude oil. Chinese refiners, facing economic challenges, have requested reduced oil supply from Saudi Arabia for December. This shift in focus from geopolitical tensions in the Middle East to demand-related anxieties has altered market dynamics.
Meeting to take place soon
OPEC+ members, set to convene on November 26, will determine future production policies, with attention particularly on whether Saudi Arabia extends its 1 million barrel-per-day voluntary cut set to conclude at the year’s end. Analysts, including those at Citi and RBC Capital Markets, foresee the potential extension of Saudi Arabia’s production cut into the first quarter of 2024, reflecting growing apprehensions about Chinese demand and broader economic uncertainties. Despite the current downward trend, some analysts anticipate a price rebound, citing factors such as easing refinery maintenance and a shift in the risk-reward balance for investors.
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