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US: Consumer confidence deteriorates in June

Wed, Jul 1 2009, 07:22 GMT
by KBC Market Research Desk

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In June, US consumer confidence deteriorated from a downwardly revised 54.8 to 49.3, while a slight improvement was expected. The details showed that consumers became more pessimistic on the present situation (24.8 from 29.7) and on the expectations (65.5 from 71.5). Consumers became also more pessimistic on the labour market conditions. After the significant improvements in the previous two months, the deterioration shows that consumer sentiment remains fragile.

The Chicago PMI improved from 34.9 to 39.9 in June, slightly above the consensus estimate of 39.0. The breakdown shows that the improvement was broadly based as all sub-indices increased. Order backlog (37.6 from 26.3) and new orders (41.6 from 37.3) showed the biggest improvements, but also prices paid (36.3 from 29.8) rose significantly in June. The improvement in the Chicago PMI raises expectations that manufacturing ISM will extend its rebound in June.

In April, S&P Case Shiller house prices showed an easing in the pace of decline from -18.72% Y/Y to -18.12% Y/Y, while the consensus was looking for a drop by 18.63% Y/Y. On a monthly basis, house prices were down by 0.56% M/M compared to -2.19% M/M in the previous month. The moderation in the declines is a positive sign, but housing market conditions remain very fragile.

EMU: M3 money supply slows again more than expected

In May, euro zone M3 money supply and credit growth slowed again more than expected. Compared to last year, M3 rose by 3.7% Y/Y, while an outcome of 4.6% Y/Y was forecasted. Looking at the details, total credit growth slowed from 4.4% Y/Y to 4.0% Y/Y and annual credit growth to the private sector declined from 3.7% Y/Y to 3.1% Y/Y. The breakdown of loans shows that loans to households dropped by 0.2% Y/Y (from 0.0% Y/Y), while loans to non-financials grew only by 4.4% Y/Y (from 5.3% Y/Y). These data indicate that the ECB’s unconventional measure proof still ineffective in supporting the flow of credit to the real economy and raise questions whether the ECB should take additional measures.

Euro zone inflation fell into negative territory in June, according to the first estimate. On a yearly basis, euro zone inflation dropped from 0.0% Y/Y to -0.1% Y/Y, slightly above the consensus estimate of -0.2% Y/Y. In the coming months, inflation is expected to decline further, but might return to positive territory at the end of this year.

In Germany, unemployment rose by 31 000 in June, less than the expected 45 000 increase. The previous figure was however upwardly revised from 1 000 to 7 000. In May, the number of vacancies dropped by 12 000 (from -61 000). The unemployment rate rose from 8.2% to 8.3% in June, in line with expectations. However, the data continued to be distorted by the newly introduced measures.

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Published on  Wed, Jul 1 2009, 07:25 GMT

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