US: Claims edge higher, consumer confidence deteriorates marginally
Initial claims rose by 12 000 to 321 000 in the most recent week, defying expectations for an about unchanged reading. The less volatile 4-week moving average rose by 4 000 to 317 000. The continuing claims rose slightly to 2 454 000, up 14 000 on the previous week. We think that the current level of claims is more in line with the underlying situation on the labour market than the very low sub 310 000 readings often registered in recent months or previous weeks.
The final November Michigan consumer sentiment index was virtually unchanged at 92.1 from the preliminary reading, but it undercut market expectations that were for a 93.3 outcome. It also declined vis-à-vis the October reading of 93.6, which was the highest since July 2005. Compared to October both the current conditions (106 versus 107.3) and the expectations sub-index (83.2 versus 84.8) declined. Michigan analysts said the data point towards a 3% growth rate of consumption in 2007 (and a 2.5% overall GDP growth rate). Consumers continued to voice more positive evaluation of home buying conditions, but they were still reluctant to buy given their uncertainty about how much home prices will eventually decline added the Michigan press release. Also car-buying attitudes improved when compared with October and are at the highest in more than one year. However, also here the most recent statistics doesn’t show that this has led to a jump in actual buying of cars. Inflation expectations (1 and 5-to-10-year) remained unchanged compared to early November, but were down versus October. Overall, the report doesn’t bring us new info on consumer confidence.
EMU: Constructive data
French household consumption rebounded in October, as it rose by 0.9% M/M following a steep 2.5% M/M decline in September. On a yearly basis, consumption is up 4.2%. The outcome was close to expectations. Consumption started Q4 on a strong footing, but one should of course take into account the losses in September. In August consumption surged 2.9% M/M higher. So, the series is volatile, but it is save to state that household spending will remain a motor of growth in Q4.
EMU industrial orders fell a less-than-expected 1.3% M/M in September (consensus: -2.2% M/M). Given the strong advances in June and July, Q3 orders rose a firm 3.6% Q/Q. In September orders declined quite sharply in Germany (-3.1% M/M) and Italy (-6.3% M/M), but this was partially offset by French orders that rose 2.5% M/M.
Italian consumer confidence improved in November. The headline index rose to 109.2 from 108.6 in October, but remains below the current peak of 110.1 in September.
OTHER NEWS: Minutes boe meeting show a 7-to-2 vote for the rate increase
In the UK, the Minutes of the Bank of England showed a 7-2 vote to hike rates to 5%, as Blanchflower and unexpectedly also Lomax dissented to keep rates unchanged. Most members agreed that the balance of risks suggested that CPI inflation would exceed the 2% target in the medium term and required an immediate increase of 25 basis points. For Blanchflower and Lomax, however, rising spare capacity and downside risks to demand were likely to keep inflation in check. Hence, the Minutes are slightly more dovish than could have been expected, but it will be the data that will decide whether another interest rate hike will be needed next February.
