Initial claims unexpectedly dropped by 21 000 to 530 000 in the most recent survey week, while continuing claims fell by 92 000 to 6138000, which is an 8-month low. The figures are good news as they suggest the labour market improvement accelerates. However, the claims are notorious volatile and thus not so reliable. Therefore, confirmation is needed in the next few weeks. The labour market developments are the linchpin of the sustainability of the recovery. Higher employment is needed to support income that gives the households the possibility to consume (more). Consumption is about 70% of GDP, underscoring its importance for growth.
Existing Home sales were down 2.7% M/M to an annualized rate of 5.1 million in August from 5.24 million rate in July. The market expected an increase to 5.35 million. The decline was both in the single-family units (--2.8%) and multi-family units (- 1.6%). The number of unsold houses however fell to 8.5 months from 9.3 months, the lowest since April 2007, while the median price decline slowed to -12.5% Y/Y from -13.6% Y/Y in July and from -17.2% Y/Y in April. Existing Homes declined in August for the first time in five months and while a disappointment, the data are still consistent with an improving trend in the housing sector.
EMU: Ifo business confidence improves moderately
The IFO headline index of business confidence rose to 91.3 in September from 90.5 in August and compares with a consensus estimate for a stronger rise to 92. It was the sixth consecutive monthly rise which confirms that the recovery is on track. However the pace of increase slowed after a few months of steep gains. This might suggest either that the recovery moderates or that the September slower rise is a one month factor, due to some special circumstance like the end of the scrap premium for cars. Looking at the last 6 months, the IFO index advanced 9 points, an advance not matched in previous recovery cycles. This puts the September figure into perspective. Both the current situation and the expectations sub-indices contributed to the advance. Overall, the IFO report fits in well with the PMI’s and a number of other national reports published in recent days. The recovery is on track, but maybe not as strong as many hoped for.
