Conference Board’s consumer confidence dropped to a new record low in January. The headline index fell from an upwardly revised 38.6 to 37.7, while market expectations had estimated to see a slight recovery, based on the improvement reported by the Michigan confidence survey. . Both the present situation sub-index and expectations declined further. Quite remarkable is that consumers became less pessimistic about the labour market, while companies are announcing additional job cuts every day. Apparently, the Obama inauguration and economic stimulus plan were unable to improve consumer sentiment.
S&P Case Shiller home prices brought a minor encouraging sign from US housing market after the upward surprise in existing home sales on Monday. In November, house prices dropped by 18.18% Y/Y slightly less than the expected decline of - 18.40% Y/Y and little changed from October. However, on a monthly basis, prices are still falling quite steeply, That means that home-owners are still seeing the value of their house dropping, leaving ever more with negative equity, a factor together with rising unemployment behind still increasing foreclosures. According to the Case Shiller index, home prices have now fallen by 25% after reaching its peak in July 2006.
In line with the Philly Fed and NY Fed, also the Richmond Fed manufacturing index improved slightly in January. The headline index rose from -55 to -49, primarily due to an improvement in new orders (-50 from -66). But also order backlog (-41 from -59), average workweek (-41 from -47) and capacity utilization (-46 from -50) increased, while shipments (-54 from -55) stayed broadly unchanged. The employment situation stayed unchanged too at -40. The three regional business confidence indicators all showed a modest increase in business sentiment, albeit is from rock bottom low levels, which raises expectations that also the manufacturing ISM will advance in January.
EMU: German IFO indicator rebounds marginally
The German IFO business climate indicator showed an unexpected improvement in January, the first after seven consecutive declines. Business climate improved slightly, from an upwardly revised 82.7 to 83.0, while the consensus was seeking for a figure of 81.0. The expectations sub-index improved from 76.9 to 79.4, while the current assessment deteriorated (from 88.8 to 86.8). In the manufacturing sector, business sentiment continued to worsen, while business climate in retailing improved. In wholesaling and construction, business sentiment stayed broadly unchanged. Both the euro zone PMI and the German business climate survey showed a marginal improvement, which indicates that producers became less negative in January. That is certainly encouraging, but it too early to conclude that the economy is on the road to recovery.
The ECB euro zone current account deficit widened sharply in November. The deficit broadened from -6.0B in October to -16.0B in November due to a big deficit in goods (-6.0B from 1.6B), which was still a surplus in October. Also income (-4.0B and -1.5B) and transfers (-9.5B from -9.7B) contributed to the widening deficit.
Other: CBI reports slight improvement in retail sales
In the UK, the CBI distributives trades report showed an improvement in the total volume of sales in January after nine consecutive months of falling sales. The headline index rose from -55 to -47. Also volume of orders placed (-51 from -58) and volume of sales for time of the year (-47 from -50) improved. The CBI Chief Economic Adviser added the most of the retail sector continues to struggle as the recession bites more deeply and February will be tough.
