In December, the plunge in durable goods orders (-2.6% M/M) exceeded expectations (-2.0% M/M) and the previous figure was sharply downwardly revised (from - 1.0% M/M to -3.7% M/M). Excluding transportation, durables dropped by 3.6% M/M and the November outcome was downwardly revised. Looking at the details, orders for transportation (0.6% M/M from -9.8% M/M) and electrical equipment (9.4% M/M from -5.0% M/M) rebounded, while all other sub-indices declined sharply. Shipments of non-defence capital goods less aircraft, which is a good predictor of business investment in equipment & software, rose by 0.9% M/M (after -1.4% M/M).
New home sales plunged by 14.7% M/M in December, while only a modest drop was expected (-2.5% M/M). Total sales dropped from a downwardly revised 388 000 to 331 000. Months’ supply rose to a new record high of 12.9, while homes for sale dropped from 397 000 to 357 0000. Both median and mean prices were again lower. These data might be a bit disappointing after the stronger than expected existing home sales, but new home sales are lagging compared to the existing home sales.
In the week ended January 24, initial claims rose by 3 000 from a downwardly revised 585 000 to 588 000. This is clearly above the expectation of 575 000, but the figures might have been distorted as the week in question included the Martin Luther’s King Holiday. Continuing claims, which are reported with a one-week lag, rose by 159 000 to a record high (4 776 000). The labour market is expected to remain very fragile after the announcements of job cuts we received earlier this week from e.g. Caterpillar, Pfizer, Boeing, Starbucks…
EMU: German unemployment rises rapidly
In Germany, the number of people unemployed rose by 56 000 in January, while the consensus was looking for an increase of 30 000. The previous figure was upwardly revised from 18 000 to 33 000 and also the November outcome was upwardly revised (from -4 000 to 4 000). Overall, this indicates that the number of people unemployed rose by 49 000 more than markets were expecting. The number of jobs created plunged by 10 000 in December and the number of vacancies dropped by 10 000 in January. The unemployment rate rose from an upwardly revised 7.7% in December to 7.8% in January. These data indicate that the German labour market is deteriorating sharply and rapidly as producers are responding quickly to slowing demand.
Euro zone economic confidence surprised on the upside in January, but the headline index showed another decline. Economic confidence dropped from an upwardly revised 70.4 to 68.9, while the consensus was looking for an outcome of 65.4. Retail confidence stayed unchanged at -20, while all other sub-indices deteriorated. Services confidence plunged from -17 to -22, while business (-34 from -33) and consumer (-31 from -30) confidence worsened marginally. Construction confidence extended its downward trend (-30 from -27). The business climate indicator deteriorated from -3.09 to -3.16. This outcome is in contrast with the earlier released PMI and IFO indicators, but European Commission confidence is traditionally lagging and therefore we might see signs of improvement in the next month.
In December, euro zone M3 money growth slowed more than expected. On a yearly basis, M3 money growth slowed from a downwardly revised 7.7% Y/Y to 7.3% Y/Y. The lower than expected outcome was due to a decline in M2 (8.0% Y/Y from 8.7% Y/Y), while M1 was rising (3.2% Y/Y from 2.2% Y/Y). Looking at the details, bank lending to the private sector slowed significantly, from 8.2% Y/Y to 6.8% Y/Y. Also growth in household lending extended its downward trend (1.8% Y/Y from 2.5% Y/Y). The lending data show clearly that both households and companies scaling back investments due to the economic crisis and tightening in lending conditions.
