Exports were down 9.7 percent from the fourth quarter and company investment declined 7.9 percent, according to the Federal Statistics Office. The Office reported that gross domestic product fell a seasonally adjusted 3.8 percent from the previous three months, confirming an initial estimate from May 15. That’s the largest drop since quarterly data were first compiled in 1970.
From October to December 2008, the German economy had already contracted by 2.2%, and by 0.5% in each of the the second and third quarters.
According to the statistics office, the decline in economic performance was mainly due to movements in the balance between exports and imports of both goods and services. As in the fourth quarter of 2008, German exports fell much more than German imports in the first three months of this year. While exports declined 9.7 % year on year, imports were down 5.4%, so that the chnaged balance of exports and imports contributed minus 2.2 percentage points to the decline of GDP.
The negative first quarter evolution was also characterised by a notable decline in investments (– 7.9%, quarter on quarter). Capital formation in machinery and equipment, in particular, was much lower than in the last quarter of 2008. Companies invested 16.2% less in machinery, equipment and vehicles than in the last quarter of 2008.
The decline in capital formation in construction was small in comparison with a drop of 2.6% on the quarter. Inventories were also run down considerably during the quarter, thus reducing growth by 0.5 percentage points. Growth was positive only only for household consumption and government consumption, which up by 0.5% and 0.3% respectively.
Year on year, German GDP was down by 6.7% in the first quarter of 2009. After calendar-adjusted, the figure is 6.9% , since there was half a working day more in the first quarter of 2009 than there was in 2008 (easter impact minus the leap year effect).
39.9 million people were employed in Germany during the first quarter, an increase by 48 000 persons (or 0.1%) on a year earlier. The number of unemployed (ILO definition) was just under 3.4 million, 7.8% of the entire economically active population.
The recession in Germany has hit industrial activity (including energy) particularly hard, and output was down 20.2% over the first quarter of 2008. Marked declines in real gross value added were recorded also by construction (– 8.9%) and by trade, transport and communications (– 6.4%). Financial, real estate, renting and business activities fell much less - by 0.9% compared with the first quarter of 2008.
In contrast to the bleak picture for investment, fixed capital formation and German exports, final consumption expenditure was ever so slightly up quarter on quarter - by 0.1% - and even did slightly better than in the last quarter of 2008 (– 0.0%).
On a year on year basis, household consumption was marginally down though - by 0.1% (following a 0.5% drop in the fourth quarter of 2008), but general government consumption expenditure was up by 0.8%.
The Long Term Outlook
The first-quarter drop in GDP marked an unprecedented fourth successive quarterly contraction for Germany’s economy. The government expects the economy to contract 6 percent this year, while ECB council member Axel Weber said earlier that while “rays of light” are positive, there’s “no reliable indication that the global economy is past the worst.” The euro-region economy may only “gradually stabilize during the latter part of 2009.”
The longer term decline in German GDP performance is now pretty clear (see chart below).
According to the Federal Statistics Office:
Measured in terms of gross domestic product changes at 1995 prices, the rates of economic growth in the former territory of the Federal Republic of Germany and - since 1991 - in Germany have continuously declined since 1970. While the average annual change was 2.8% between 1970 and 1980, it amounted to 2.6% between 1980 and 1991 and to 1.5% between 1991 and 2001.
Since 2001 the performance of the German economy has in fact been worse rather than better, much to the consternation of those who hoped that many years of sacrifice in the form of wage deflation and structural reform would lead to a rebirth of the country's former economic prowess. In reality the German economy shrank (0.2%) in 2003, and grew by only around 1% in both 2004 and 2005. And while the German economy picked up notably in 2006 and 2007 (with growth rates of 3.2% and 2.6% respectively) and many talking in terms of such grandiose notions as global uncoupling and "Goldilocks" type sustainable recoveries, the most striking feature of the recent German dynamic has been the way that internal demand failed to respond to the externally driven export stimulus. Of course, all the speculation came to an abrupt end in 2008 when the German economy once more entered recession as world trade expansion slowed and exports collapsed (with GDP only growing by 1% over the year), while 2009 looks set to be a lot worse (with the IMF currently forecasting a contraction somewhere in the region of 5%, and forecasts of up to minus 7% not seeming exaggerated).
But now we have detailed German Q1 GDP results from the Federal Statistics Office, and we find a very similar picture. Total investment was strongly down (– 7.9% quarter on quarter), while capital formation in machinery and equipment, was 16.2% lower than in the last quarter of 2008, and 19.6% lower than in the first three months of last year.
But all of that is to some extent history. Much more preoccupying - certainly for the "onward-annd-upward-we-go" thesis - is that German plant and machinery orders declined the most on record in April from a year earlier. Orders dropped an annual 58 percent, the most since data collection started in 1950, after falling an annual 35 percent in March, according to the Frankfurt-based VDMA machine makers association in a statement today. Export orders slumped 60 percent while domestic demand dropped 52 percent. So things actually seem to have deteriorated in April with respect to March. No good news this.
Especially when you read the same day an interview with Hans-Joachim Dübel - CEO of Berlin based FinPolConsult, one of the leading and few relatively independent voices in the German housing finance community - where he says: "My guess is that the Landesbanken alone will cause ultimate losses of 8-10% of German GDP, which is real money. Compare that sum with the 5% of GDP costs for the US S&L crisis".
"The economic outlook, although remaining at a very low level, has also risen for the second time in a row and the propensity to buy also defended its positive level to remain virtually unchanged in May. Conversely, however, income expectations dropped back as a result of escalating fears of job losses, concerns which are rising in the wake of increased short-time work and declining income prospects."
GFK Press Release
Economic expectations were up very slightly - a 2.9 point increase - suggesting that, at least for the time being the downward trend in the economic climate appears to have halted, but with an index value over 40 points below that for the same time last year, the indicator remains at a very low level.
In spite of continuing economic pessimism over the present, consumers seem to be assuming that the worst is behind us. While in terms of the ferocity of the contraction this is almost certainly true, it does not mean things will improve, only that they will get worse more slowly.
After an increase of 3.4 points in April, income expectations were down by 1.3 points in May. The index currently stands at -9.3 points.
On the one hand, the very low inflation readings - German inflation, according to the harmonized European Union index , rose 0.1 percent in April from the previous month, when they dropped 0.2 percent - and forthcoming pension increases averaging 2.5% seem to have had the effect of stabilizing purchasing power and buoying up income expectations.
On the other hand, growing fears of job losses are having an impact on German sentiment. Following a period of continuous decline in job anxieties in recent years, German concerns about unemployment are once more creeping up, rising by 4 percentage points so far in 2009 according to the GfK survey "Challenges of Europe”. With a 57% rating, problems on the labor market are by far the biggest worry for Germans at the moment. However, the true test of the mood here will only come if the job market contracts significantly during the course of the year, which looks entirely posibel.
The propensity to buy was more or less stationary in the month, with the index recording a minimal rise of 0.1 points. Compared with this time least yearthe index has risen by just under 33 points.
Whether the consumer climate index reading remains at the present level in the coming months, or whether there is another shoe to drop depends very much on the extent to which job market prospects contract. If the short-time work measures prove incapable of generating any identifiable economic revival, companies will be compelled to introduce staff redundancies, leading to a significant increase in the level of unemployment. In turn, this would further fuel fears of job losses and severely impact the consumer climate.
The manufacturing outlook remained broadly unchanged, with survey respondents reporting a deterioration in current business as compared with April but improved expectations over the next six months.
In wholesaling and retailing business climate has generally improved. Retailers are no longer so dissatisfied with their current business situation and anticipate a less unfavourable six-month business outlook. In construction the climate was found to have worsened again. Building contractors are less satisfied with their current business situation and havea less favourable business outlook than in April.
Chancellor Angela Merkel’s coalition has intorduced stimulus plans worth about 82 billion euros to try to offset the worst of the recession, and the government still expects the economy to contract by around 6 percent in 2009.
The European Central Bank this month reduced its benchmark rate to 1 percent, a record low, and ECB President Jean-Claude Trichet does not exclude the possibility of further cuts.
The top Germany economic institutes forecast the country will lose 1.4 million jobs this year and next, pushing the average number of unemployed to a five-year high of 4.7 million. German unemployment rose for a sixth straight month in April, taking the jobless rate to 8.3 percent.
On the other hand German manufacturing activity contracted at the slowest pace in seven months in May,according to the flash purchasing managers index, while investor confidence rose significantly this month, climbing to a three-year high.
Bundesbank President Axel Weber said recently “There are some grounds for being optimistic......However, it is certainly not advisable to be overly optimistic that the recovery process is safely on track.”
On the other hand, eurozone economic activity will continue to come under pressure in the months to come as the impact of the sharp contraction in activity feeds through into the labour market. And companies are likely to keep cutting spending because the decline in external demand has left factories operating well below capacity level, and semi-idle workforces can only be retained for so long. Markit said that the pace of job losses had eased this month – but only slightly compared with the record pace reported in April.
The flash reading only gives details for two of the euro area's big four. The rate of decline in Germany's private sector eased to its slowest in seven months in May, and the composite index rose to 44.4 from 40.1 in April, suggesting the contraction in the second quarter will be much slower than the 3.8% slump (15.2% annualised) in the first. Markit estimated that we may be looking at something like a 0.6 decline (-2.4% annualised). The outcome may be a bit worse than this, but still a significant improvement seem certain.
The German manufacturing PMI index rose to 39.1 from 35.4 in April, while the services sector index rose to 46.0 from 43.8. The manufacturing index was dragged down by major job losses in the sector, and according to Markit "Manufacturing employment in Germany is falling at a far, far faster rate still than services...Manufacturing has really been hammered even though there was some easing in the rate of job losses in May."
The French services PMI was up at 47.6 in May from 46.5 in April, while the manufacturing sector also rose to an above expected level of 43.1 from 40.1.
Currency deals that profit from the difference in interest rates globally are returning to favor on speculation the worst of the creditcrisis may be over, spurring investors to buy eastern European assets,Deutsche Bank AG said.The Russian ruble, Hungarian forint and Turkish lira offer investorsthe best returns in the next two to three months thanks to the highestrates in the region, said Angus Halkett, a strategist at Deutsche Bankin London.The so-called carry trade, in which investors borrow in currencieswith low interest rates to buy higher-yielding assets, helped theforint and lira surge to record highs last year before the collapse of Lehman Brothers Holdings Inc. prompted investors to sell riskier assets.Perhaps people should reflect a little more on the significance of those final few words: "before the collapse of Lehman Brothers Holdings Inc. prompted investors to sell riskier assets".
So basically, "Big Ben's" US bailout is fuelling specualtion on Hungarian debt!Turkey’s key interest rate is 9.25 percent, Hungary’s is 9.5 percent and Russia’s 12 percent. The cost of borrowing in euros overnightbetween banks reached 0.56 percent yesterday from 3.05 percent sixmonths ago as the European Central Bank began cutting interest rates and pledges of international aid allayed concern the global slowdownwould worsen. The London interbank offered rate, or Libor, forovernight loans in dollars fell to 0.22 percent from 0.4 percent inNovember as the U.S. government and the Federal Reserve spent, lentorcommitted $12.8 trillion to stem the longest recession since the1930s.
Deutsche Bank recommends investors sell the euro against the forint on bets the rate difference will help the Hungarian currency gain 10 percent to 260 per euro in two to three months from 286.55 today. Investors should also sell the dollar against the lira and buy the ruble against the dollar-euro basket, the bank said.And it isn't only Deutsche Bank, Goldman Sachs recommended on April 3 that investors use euros, dollars and yen to buy Mexican pesos, real, rupiah, rand and Russia rubles.
"April's survey provides hope that the German manufacturing downturn has passed its nadir, as the PMI moved further above January's record low," according to Tim Moore, economist at Markit Economics. "However, output still fell at a rate unprecedented prior to the fourth quarter of 2008, prompting firms to trim employment and inventories to the greatest extent in the survey history," he added.
New orders declined for the tenth successive month but at a much slower pace than in March, with the sub-index rising to 37.0 from 28.9 - a series record month-on-month rise. The improvement in the PMI results fits in with other recent sentiment indicator readings in German, with the Ifo institute's business climate index improving in April to its best level in five months, while the ZEW investor sentiment gauge rose to its highest level in almost two years. However, we are still a far cry from a return to output growth in Germany, with most observers anticipating a GDP contraction of between 5% and 7% for 2009, and given the export dependence we should be looking for an increase in imports in main customer economies before we start thinking about any expansion in German manufacturing output.
Industrial Output
German industrial production held more or less steady in March, for the first time in six months. Output was unchanged from February, when it dropped 3.4 percent, according to the latest data from the Economy Ministry in Berlin. Manufacturing industry continued to contract however, and was down 0.4% on the month, and by 22.8% year on year.
That being said, German industrial output levels are now very low (see chart below), and are roughly comparable with those registered in 1999/2000.
Exports Recover Slightly In March
German exports were up for the first time in six months in March, adding to signs that the pace of the economic contraction slowed slighly as we entered the spring. Exports, adjusted for working days and seasonal changes, were 0.7 percent from February, when they fell 1.3 percent, according to the latest data from the Federal Statistics Office. Year on year exports were down 15.8% following a 23.5% drop in February and a 23.2% drop in January.
German imports increased 0.8 percent in March from the previous month, when they dropped 4.8 percent. The trade surplus widened to 11.3 billion euros from 8.6 billion euros in February. The surplus in the current account, the measure of all trade including services, was 10.2 billion euros, up from 6.8 billion euros. On a seasonally adjusted basis exports were up by 0.4 billion euros from February, which means you can just barely notice the change on the chart below: ie there is still a very long way to go here.
Services Contraction Also Slows
Activity in Germany's private sector shrank for the eighth month running in April, though as elsewhere the pace of the contraction eased, in the German case to the slowest rate since last October. The services sector PMI edged up to 43.8 from 42.3 in March, while the business expectations sub index jumped to 44.4 from 39.0, and the headline composite PMI reading rose to 40.1 from 38.3 in March.
Markit reported that "Pessimism about the year ahead outlook for activity was the least marked since June 2008. This partly reflected the support given to business sentiment from the government's economic stimulus plans, as well as hopes that overall market conditions will begin to stabilise". These firmer expectations are consistent with the rise in the April Ifo reading for German corporate sentiment, which hit its strongest level in five months.
However, despite the more positive business expectations, the German government has slashed its forecast for the economy, projecting a record 6-percent contraction this year. Previously it had not shrunk by more than 1 percent in any year since the second world war.
In harmony with this more sober assessment, the sub-index on employment fell to 40.6 from 42.3 in March. "We are now seeing the labour market feel the full force of the economic downturn, with the latest wave of private sector job losses the steepest for at least 11 years," according to Tim Moore, economist at Markit Economics. "This provides advance warning that April's spike in official unemployment numbers will be repeated during the months ahead ... firms are likely to make further substantial job cuts even after the worst of the recession has passed," he added. German unemployment rose for the sixth month running in April to hit its highest level since late 2007 despite government subsidies designed to prevent mass layoffs.
Consumer Confidence Holds Steady
Investor Sentiment Continues To Rise
The ZEW Indicator of Investor Sentiment continued to improve in April, and rose by 16.5 points to stands at 13.0 following a reading of minus 3.5 in March. For the first time since July 2007, The indicator was positive for the first time since July 2007, although it is still well below its long term historical average of 26.1.
According to ZEW the indicator has been positively affected by the German government stimulus packages. Furthermore, investors seem to be taking the view that low inflation rates may give some support private consumption. They also felt that the economic outlook for the United States has improved, and responded to some vaguely positive signals emanating from China.
“Along with other indicators, the ZEW sentiment indicator reveals that there are well-founded expectations that the downward dynamics of the business cycle are bottoming out. It is even becoming more likely that the economy will slowly recover in the second half of this year.”, says ZEW President Prof. Wolfgang Franz.
Whether Franz is right in this very upbeat assessment really does remain to be seen, since I personally am far convinced that we have the bottom of this anywhere in sight yet, especially given German export dependence and the fact that year on year contractions in imports are still very strong in nearly all the major customers.
So while an increasing volume of data suggest confidence across Europe is stabilizing and the recession slowing, the continued increase in unemployment may well weaken consumer spending and help prolong the recession. And with PMI surveys showing the employment output as bleak both in the service and manufacturing industries further increases in unemployment now seem inevitable.
Job Creation Turns Negative In March
The number of those employed in Germany was down year on year in March for the first time in several years. According to provisional results from the Federal Statistical Office total March employment in Germany was 39.89 million - a decrease of 46,000 (–0.1%) on a year earlier. The last time the number of persons in employment decreased from the same month a year earlier was in February 2006.
Generally employment increases in March due to the usual spring rebound in economic activity. Over the last three years employment was up by an average 138,000 persons from February. This March, however, the increase was only 53,000 (+0.1%). The Federal Statistics Office noted that the significant extension of the short-time work probably rescued the numbers from being even worse.
Seasonally adjusted the total number of employed was 40.18 million in March, a seasonally adjusted decrease by 27,000 persons (–0.1%) on February.
While Deflation Dangers Remain
German producer prices fell for the first time in five years in March, suggesting that the deflation risks are increasing in Europe’s largest economy. Prices were down 0.5 percent from a year earlier following an annual 0.9 percent gain in February, according to data from the Federal Statistics Office. That’s the first annual decline since February 2004 and the biggest drop since September 2002.
Plenty More Downside To Come
Perhaps the worst casualty of all this will be German public finances. German tax revenue for 2009 is now projected to decline by more than an additional 300 billion euros as compared with previous estimates. Germany’s finance minster Peer Steinbruck is reportedly pretty depressed by the estimate, since it makes him the finance minister who presided over the highest borrowing requirement in history (as opposed to the finance minister who balanced the budget, which is what he set out to do). The economics minister, meanwhile, said that the loss in tax revenues was no reason not to cut taxes. The EU Commission now forecast Germany will have a deficit of 3.9% of GDP this year and 5.9% in 2010. As a result gross government debt is projected to climb from 65.9% of GDP in 2008 to 73.4% in 2009 and 78.7% in 2010.
The JPMorgan data is also backed by the results of the twice-yearly survey of service sector sentiment published by Markit Economics this week. The survey is carried out in the same companies as are sampled for the monthly purchasingmanagers’ indices, and showed thatcompanies in European and emerging markets services sector havenow recovered much of the confidence lost at the start of the global recession.
The majority of companies report that they expect the volume of business to improve over the coming year, with revenues growing and new orders rising. There are however important differences, since while greater optimism is evident in the Bric countries of Brazil, Russia, India and China, some European economies have notably failed to rebound, with Germany standing out as a centre of gloom at the moment, with many German companies continuing to suffer major doubts that their business outlook will improve.
Across Europe in general, 39.5 percent of service providers stated they expect their volume of business to improve over the year ahead with 21.5 percent forecasting a decline. Thus there is a positive balance of +18. This balance is far higher than the -2.9 figure recorded last October, though it is not yet at the +30 level of a year ago when few companies saw a deep recession ahead.
In the Bric countries, on the other hand, the mood is even better. The balance of Brazilian companies expecting higher volumes of business was +60.4, higher than a year ago, and the steep declines in confidence earlier witnessed in Russia and India have now been reversed. The outlier here is the Chinese service sector, which is a little less optimistic than sixmonths ago, even if the outlook is still broadly optimistic. This may well suggest that earlier Chinese reactions where rather over optimistic, since the country's export sector is still facing veryserious problems.
Eurozone
The Eurozone services PMI staged its biggest one-month rise since December 2001 as Markit unexpectedly revised up its services business activity index to 43.8 following the earlier flash reading of 43.1. Activity thus registered its slowest pace of contraction in six months in a sector which covers everything from financial services to airlines. The figure was well above the 40.9 registered in March, but still heavily in contraction territory. The rate of contraction did, however, slow in all four of the biggest euro zone countries even reaching the slowest rate of contraction in nearly a year in Spain.
The movement in the reading for services business expectations to 54.4 from 48.6 in March was the biggest one-month rise in this index since January 2002, and this is likely to further encourage optimists who expect the eurozone economy to start to grow again before the year is out, but really it would be very premature to draw any longer term forward looking projections at this point, especially given sensitivity in the index to seasonal factors like Easter and the weather.
Business expectations were generally up, and were the best in 15 months for Spain, and in 10 months in both Germany and France, while in Italy they hit an eight-month high. The report, however, did suggest that unemployment, which is already at 8.9 percent for the euro area as a whole (and 17.4 percent in Spain), is set to rise even further, with record rates of job cutting being reported across the entire euro area service sector.
The service sector thus is showing a significantly sharper rebound from the record declines of the last few months than is to be seen in the manufacturing sector, which continued to contract at a rapid pace in April.
Prices continue to fall, and services output prices registered the third-fastest decline in the survey's history, second only to February and March this year, with those surveyed citing increased competition for new business and pressure from clients. Service providers also reported falls in input costs due to reduced labour costs and lower prices from suppliers, but, according to Markit, the decrease here was less marked than that for output prices.
Italy
Italian service sector activity contracted for the 17th consecutive month in April although at the slowest rate for six months. The Markit/ADACI Purchasing Managers' Index rose to 42.0 from 39.1 in March, but still is not that far above the record low of 37.9 recorded in February. Activity has now been stick below the 50 mark that separates growth from contraction since November 2007.
The survey showed new business shrinking for the eighteenth straight month in April, though the rate of decline eased for the second month running, while expectations of business in a year's time rose to an eight-month high. As elsewhere, while optimism is rising Markit did point to record job losses as a likely on consumer spending looking ahead, making hopes of a swift recovery extremely premature. The employment sub-index fell to 44.0 from 44.6, as firms cut jobs at a survey record rate in response to the ongoing loss of business. The survey is thus consistent with other recent indicators that have pointed to an economy still mired in the deep recession that began in spring of last year, but with some grounds for thinking that the lowest point may now have been passed. Consumer and business sentiment as measured by the ISAE institute both rose in April, and the manufacturing PMI showed activity shrinking at its slowest rate for six months after the index hit a record low in March.
Deflationary pressure remained evident with service firms cutting their prices for the seventh month running and at the fastest rate in the survey's history in response to weak demand, while input prices showed no monthly increase for the first time since the survey began. The Italian government slashed its economic forecasts last week, and now project gross domestic product to fall by 4.2 percent this year following last year's 1.0 percent decline. The International Monetary Fund is more pessimistic, forecasting a 4.4 percent fall this year and a further drop of 0.4 percent in 2010. Italy thus now possibly faces three years of economic contraction one after the other although previously the country had not posted two consecutive years of falling GDP in its entire post-war history.
Germany
Activity in Germany's private sector shrank for the eighth month running in April, though as elsewhere the pace of the contraction eased, in the German case to the slowest rate since last October. The services sector PMI edged up to 43.8 from 42.3 in March, while the business expectations sub index jumped to 44.4 from 39.0, and the headline composite PMI reading rose to 40.1 from 38.3 in March.
Markit reported that "Pessimism about the year ahead outlook for activity was the least marked since June 2008. This partly reflected the support given to business sentiment from the government's economic stimulus plans, as well as hopes that overall market conditions will begin to stabilise". These firmer expectations are consistent with the rise in the April Ifo reading for German corporate sentiment, which hit its strongest level in five months.
However, despite the more positive business expectations, the German government has slashed its forecast for the economy, projecting a record 6-percent contraction this year. Previously it had not shrunk by more than 1 percent in any year since the second world war.
In harmony with this more sober assessment, the sub-index on employment fell to 40.6 from 42.3 in March. "We are now seeing the labour market feel the full force of the economic downturn, with the latest wave of private sector job losses the steepest for at least 11 years," according to Tim Moore, economist at Markit Economics. "This provides advance warning that April's spike in official unemployment numbers will be repeated during the months ahead ... firms are likely to make further substantial job cuts even after the worst of the recession has passed," he added. German unemployment rose for the sixth month running in April to hit its highest level since late 2007 despite government subsidies designed to prevent mass layoffs.
France
The contraction also eased in the French services sector in April, this time for a second successive month in April, and the Markit/CDAF final services PMI reached its highest level in six months at 46.5, up from 43.6 in March. The composite PMI also rose to 43.8 for the month, from a revised figure of 40.2 in March.
According to Markit panellists continued to report that overall operating conditions remained unfavourable and that falling new business had again negatively impacted on activity. New orders to service providers fell for the seventh consecutive month, with hotels and restaurants bearing the brunt of the downturn as customers cut back on discretionary spending. The business expectations index on the other hand climbed to 58.3 in April from 51.9 in March, and responses were more optimistic, with Markit reporting that 37 percent of respondents expected output to be higher in twelve months' time.
In the short term, however, the picture was pretty similar to that seen elsewhere , with firms continuing to make painful adjustments to cope with a harsh economic environment, slashing prices to boost sales, and making further sweeping cuts to staffing levels. April's output prices index showed prices falling for the eighth straight month, hitting a record low of 38.1, compared with the March reading of 38.4. The services employment index rose slightly to 41.0 from 40.8 in March, but still remained close to February's survey record low of 40.6, indicating a further steep contraction in the service sector workforce, according to the Markit report.
Russia
Russia's service industries contracted at the slowest pace in six months in April as business confidence improved, according to the monthly report from VTB Capital, with the PMI coming in at 44.4, compared with 43.9 in March.
While Russian services activity fell for the seventh consecutive month, it continued to rebound from December’s record fall of 36.4. The rate of decline in new orders also eased for the third month in succession after registering a record contraction in January. Prices charged by companies declined for the first time since VTB started compiling the survey as providers competed by offering lower prices and discounts, according to the report. Input prices advanced at the slowest pace on record.
Russia’s inflation rate fell slightly in April, dropping to 13.2 percent after rising to 14 percent in March, with consumer-price growth slowing to 0.7 percent month on month, according to the Federal Statistics Service. Retail sales were down an annual 4 percent in March, the biggest decrease since September 1999, as frozen credit markets and falling incomes forced Russians to curb spending, while GDP is now thought to have fallen 9.5% year on year in the first quarter of 2009.
United States
U.S. service-producing industries contracted again in April for the seventh straight month, but again the pace was slower than in March, according to the US Institute for Supply Management.
The ISM non-manufacturing index improved to 43.7% from 40.8% in March. This was the first increase since January. The index has now been below 50% since October, and touched its lowest level of 37.4% in November. Seven of 18 industries surveyed actually showed frowth in April, including real estate, entertainment, retail, and finance. The new orders index improved to 47.0% from 38.8%.
The employment index improved to 37% from 32.3%, indicating a slackening in the pace of job destruction.
