Pending Home sales rose by 0.2% M/M in September following a 6.5% M/M drop in August. Sales are down 20.4% compared to September 2006. The outcome was a bit better than the 2% MM drop expected. It is too early to draw conclusions from this stabilization, but it might suggest that the Existing Home sales that are preceded by the Pending Home sales stabilize in October or November.
The IBD Economic Optimism index slid further to 43.8 in November from 47.3 in October, defying expectations for a smaller decline to 46.5. A drop below 50 signals a negative outlook. It suggests that consumer confidence may continue to worsen.
EMU: Q3 growth looks very fine, but outlook clouded
German ZEW economic sentiment index dropped further to -32.5 in November from -18.1 in October, the lowest since February 1993. So, after a stabilization in October, the decline continued. The less important, current situation index stabilized at a still high level of 70. Fears about credit woes in the US infecting the euro area economy via amongst others a stronger euro certainly played a role. The ZEW report was recently often at odds with the IFO survey, the sharp decline in recent months points to downside growth risks.
EMU Economic growth was still strong in Q3, as Italian, Dutch and Spanish GDP figures suggest. All three countries reported strong growth and this suggests that the EMU GDP figure for the third quarter, to be released today, will be strong too. Of course, we shouldn’t forget that Q2 was disappointing (0.3% Q/Q) and the quarterly data are quite volatile. In this respect, September production was reported at -0.7% M/M. While this didn’t prevent production to have had a strong Q3, it suggests that the momentum is waning and Q4 growth could be again quite weak.
Others: UK inflation again above 2%
UK CPI rose by a slightly firmer-than-expected 0.5% M/M and 2.1% Y/Y in October, following a 1.8% Y/Y increase in September. Core inflation on the other hand stabilized at 1.5% Y/Y. Higher energy and food prices were, also in the UK, behind the rise in inflation to above the BoE target. The news contains good news for both the hawkish and the dovish fraction inside the MPC and it remains uncertain whether the MPC will still decide to lower rates before the end of the year.
