Durable orders dropped in Augustus by 2.4% M/M following a 4.8% M/M increase in July. Excluding transportation durable orders were flat following a 0.9% M/M gain. Civilian aircraft orders were the volatile factor in the report down 42% in August. Both measures fell short of the consensus estimates that expected growth of 0.4% M/M and 1% M/M respectively. While a weaker outcome than expected is always a setback for those who count on an above consensus rebound in economic growth to which the cyclical industrial sector is a key item, but we wouldn’t yet raise the red flag. Orders are notoriously volatile and the Q3 growth figures for the durable goods orders most important sub-sectors are still sharply up on Q2 (even if of course the September data are missing). This also is the case for the important non-defence capital goods orders. Of course the August weakness shouldn’t be prolonged for more months of disappointments.
Michigan consumer sentiment improved further during September according to the final September report. Indeed, the headline figure edged up another 3.2 points to 73.5 from 70.2 preliminary and 65.7 in August. The outcome surpassed expectations for a near stabilization at 70.5. Both the current situation and the expectations subindices contributed to the advance. Near time inflation expectations were sharply down to 2.2% from 2.6%, while the 5-year inflation expectations eased to 2.8% from 2.9% previously.
August New Home sales were up 0.7% to 429 000 annual units from a downwardly revised 426 000 in July. While it is the highest sales pace since September 2008 and the fifth consecutive monthly increase, the outcome fell shy of the consensus estimate for a rise to 440 000. The number of sales was only up in the west while it stabilized in the South and declined slightly in the Mid-West and Northeast. Median prices were down 11.7% Y/Y, down from 9.1% Y/Y drop in July. Positively, the inventories of unsold New Homes continues to improve (262 000, the lowest since November 1992) and is currently 7.3 months of sales down from 7.6 in July and 12.4 in January, the peak for the cycle. The report is consistent with a slow recovery in the housing market, as conditions remain still difficult.
EMU: M3 money supply growth slows further
M3 money supply growth slowed further in August to 2.5% Y/Y from 3% Y/Y in July, undershooting the consensus estimate for a 2.7% Y/Y increase. The less volatile 3-month measure slowed to 3% Y/Y from 3.4% Y/Y previously. Looking to the details, M1 money supply growth (money in circulation/ overnight deposits) accelerated further to 13.6% Y/Y from 12.1% Y/Y in July and 9.4% Y/Y in June. As a consequence, the less liquid items of M3 were responsible for the slowing in M3. especially the repos, MM fund shares, debt securities and marketable instruments. The slowing van M3 was induced by a slowing in credit expansion. Credit to euro area residents slowed to 2.8% from 3.3%. Credit to general government expanded rising by 11.5% Y/Y from 10.9% Y/Y previously, but credit to other euro area residents slowed to only 1.1% Y/Y from 1.8% Y/Y previously, with loans to private sector barely positive at 0.1% Y/Y down from 0.7% Y/Y previously. This will keep the debate alive whether credit demand is most behind the slowdown or restriction of credit supply (credit crunch).
