Both housing starts and permits surprised on the downside of expectations in March after an unexpected improvement in the month before. Housing starts dropped by 10.8% M/M to 510 000, after rising by 17% in the February. The decline was due to a 29% plunge is multi family homes, while single family homes stayed unchanged. Housing permits dropped by 9.0% M/M to 513 000 as both single (-7.4% M/M) and multi (-12.6% M/M) family homes dropped. Houses under construction dropped by 4.3% M/M in March, while housing completed rose by 3.5% M/M. These data might indicate that last month’s improvement was only short-lived, which is no surprise as the large inventories of unsold homes should be worked off before we expect to see a significant improvement in both housing starts and permits.
In the week ended April 11, initial claims dropped by 53 000 from an upwardly revised 663 000 to 610 000, while the consensus was looking for a marginal increase. Continuing claims, which are reported with a one week lag, surprised on the upside of expectations, rising above 6 million. In the week ended April 4, continuing claims, rose by 172 000 to 6 022 000. Nevertheless, we doubt whether the drop in initial claims is reliable as the seasonal adjustment factors might show some swings due to the Good Friday holiday.
After the New York Fed, also the Philadelphia Fed surprised on the upside of expectations. The Philly Fed index rose from -35.0 to -24.4, while a figure of -32 was forecasted. The improvement was driven by significant increases in new orders (- 24.3 from -40.7), inventories (-40.2 from -55.6), number of employees (-44.9 from - 52.0) and delivery time (-17.1 from -30.8). Shipments (-35.7 from -26.5) and average workweek (-41.2 from -31.6), on the contrary, deteriorated. Looking at price developments, prices paid stayed broadly unchanged, while prices received dropped (- 41.4 from -32.6). Together with the NY fed, this might be a sign that business confidence improved further in April.
EMU: industrial production declines further in February
Euro zone industrial production dropped by 2.3% M/M in February, slightly less than expected. The January outcome was upwardly revised from -3.5% M/M to - 2.4% M/M. The details show that weakness was broadly based with sharp declines in durable consumer goods (-4.3% M/M), capital goods (-3.0% M/M) and intermediate goods (-2.4% M/M). But also energy and non-durable consumer goods dropped significantly. The yearly figure dropped to a new record low (-18.4% Y/Y) and is expected to decline further in the coming months.
In March, the final figure of euro zone CPI confirmed the flash outcome of 0.6% Y/Y. Also the monthly figure came out in line with expectations rising by 0.4% M/M. Looking at the details, food (-0.2% M/M) and energy (-1.2% M/M) dropped in March, but also the less volatile, core CPI, excluding food and energy, declined (from 1.7% Y/Y to 1.5% Y/Y). Prices of clothing (7.5% M/M), alcohol & tobacco (0.4% M/M), household equipment (0.5% M/M) and health (0.1% M/M) were rising, while energy related items, housing, education, recreation, hotels and restaurants dropped. In the coming months, inflation is expected to decline further and a temporary negative inflation figure is not excluded.
