In October, the US durable goods orders fell for a third consecutive month, this time by 0.4% M/M. Excluding the volatile transportation orders, orders even fell by 0.7% M/M. Shipments of non-defence capital goods less aircraft, which is a good proxy for non-residential investment in the GDP data, declined too by 1.2% after rising 1.7% in September. This is the steepest drop for this component since the start of the year. Overall, the report shows that the manufacturing sector started Q4 with a very soft pulse.

In the housing market, the number of existing home sales declined further in October to an annualized 4.97M from an already slightly downwardly revised 5.03M. To make things worse, the number of months needed to sell all the houses for sale increased to a new record high at 10.8 months suggesting that there is no turnaround coming up yet and that more price declines will be needed to reduce inventories to a more normal level. Also median prices were weak, dropping 5.1% Y/Y.


EMU: Money supply growth surges amid market turmoil

In the euro zone, M3 money supply growth accelerated from 11.3% Y/Y in September to 12.3% Y/Y in October. Money supply growth is now at its fastest pace in more than 28 years. The counterparts of M3 showed that private sector lending growth accelerated too from 11.0% Y/Y in September to 11.2% Y/Y in October. This was mainly due to stronger lending growth to non-monetary financial intermediaries (22.8% vs. 20.2%) and to insurance corporations and pension funds (30.1% vs. 25.5%), while lending to the two most important categories, non-financial corporations and households, stabilized at respectively 13.9% Y/Y and 6.8% Y/Y. Within the latter sector, lending for house purchase stabilized at 7.9% Y/Y, while consumer credit accelerated slightly from 5.1% to 5.5% Y/Y. Despite the slight acceleration in consumer credit growth, the slowing trend is still intact, which raises some doubts about the economic outlook for consumer spending in the euro zone. This along with the fact that the current strong growth rate in money and credit supply probably overstates the underlying growth rate due to the recent credit turmoil suggests the ECB won’t overreact to these data.