Week in review: The eurozone's industrial production fell 0.3%

Week in review

Canada – After the prior month’s surge, housing starts fell 14.4% to a three-month low of 198K in October, although that was close to consensus expectations. The decrease in October starts was entirely in urban areas (-16%) which dwarfed the near-9% increase in rural starts. The decline in urban starts was due to multis (-22.4%) which more than offset a 1.3% increase for single family homes. On a regional basis in urban areas, losses were reported in Ontario (-19%), Quebec (-29%), the Prairies (-18%), and Atlantic Canada (-30%), while BC bucked the trend with a 21% increase in starts.

The Teranet–National Bank House Price Index rose 0.1% in October thanks to gains in 5 of the 11 metropolitan regions covered. On a year-on-year basis, home prices were up 5.6% nationally with above average increases in Vancouver (+9.8%), Toronto (+9.3%), Hamilton (+9.3%), Victoria (+6.4%), a small increase in Edmonton (+1.4%) and flat prices in Winnipeg and Ottawa-Gatineau. Four cities are now in deflation mode on a year-on-year basis: Montreal (-0.6%), Calgary (-1%), Halifax (- 1.1%), and Quebec City (-3.2%).

United States – Retail sales rose 0.1% in October, less than the 0.3% expected by consensus. Adding to the disappointment was the downgrade to the prior month to a flat print (from +0.1%). October sales were restrained by motor vehicles/parts (-0.5%, the first drop in four months). Excluding autos, sales rose just 0.2%, also weaker than consensus which was expecting a +0.4% print. Here too, the bad news was compounded by downward revisions to the prior month to - 0.4% (from -0.3%). October ex-auto sales were hurt by falling gasoline station receipts (fourth decline in a row) and declines in sales of food, electronics and general merchandise. Those were partly offset by gains for non-store retailers and sellers of furniture, building materials, sporting goods.

The producer price index showed the headline PPI falling 0.4% in October, much weaker than consensus which was looking for an increase. That caused the year-on-year print to fall to -1.6%, the lowest on records going back to 2010. The PPI was hammered in part by declines for food prices (-0.8%) while energy prices were flat. Excluding food and energy, producer prices fell 0.3% driven by declines in both core goods and services. That allowed the year-on-year core PPI to fall to just 0.1%, also the lowest in at least 5 years.

The weekly jobless claims report showed initial claims remaining unchanged at 276K in the week of November 7th. The more reliable 4-week moving average rose to 268K. Continuing claims for the prior week rose 5K to 2.17 million.

World – The eurozone’s GDP grew just 1.2% annualized in Q3, or +0.3% unannualized. Of the fifteen countries that reported quarterly growth rates (out of 19 eurozone members), 11 showed expanding output, namely Germany (+0.3%), France (+0.3%), Italy (+0.2%), Spain (+0.8%), the Netherlands (+0.1%), Belgium (+0.2%), Austria (+0.1%), Latvia (+0.4%), Lithuania (+0.5%), Cyprus (+0.5%) and Slovakia (+0.9%), all in unannualized terms. Three countries printed negative growth: Finland (-0.6%), Greece (-0.5%), and Estonia (-0.5%) and one was flat, namely Portugal. Despite the overall gains, the eurozone’s output remains about 0.5% below the 2008 peak, or 2.7% below peak excluding Germany.

The eurozone’s industrial production fell 0.3% in September as sharp declines in Germany (second drop in a row), more than offset small gains in France, Italy and Spain.

In China, October data showed a year-on-year increase for industrial production (+5.6%) and retail spending (+11%). The news was less encouraging with regards to exports (-6.9%) and imports (-18.8%), both falling significantly on a year-onyear basis. New bank loans were also lacklustre. The annual inflation rate remained mild in October with a print of just 1.3% for the CPI and -5.9% (i.e. in deflation) according to the PPI.

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