Both US housing starts and permits surprised on the downside of expectations in September. Housing starts rose by 0.5% M/M from a downwardly revised 587 000 (earlier reported as 598 000) to 590 000. The increase was entirely based in the single family starts (3.9% M/M), while multi-family dropped by 15.2% M/M. Building permits, on the contrary, dropped by 1.2% M/M from a downwardly revised 580 000 to 573 000. Single family permits fell by 3.0% M/M, while multi-family increased by 6.0% M/M. Houses under construction dropped by 2.0% M/M and housing completed fell by 10.2% M/M. The disappointing figures, coming on the heels of a disappointing NAHB homebuilders’ survey, might be due to governments’ stimulus programme which will expire at the end of November, if it isn’t prolonged by Congress.

In September, producer prices dropped from -4.3% Y/Y to -4.8% Y/Y, while an unchanged reading was expected. On a monthly basis, producer prices fell by 0.6% M/M. Looking at the details, the unexpected decline was largely based in gasoline (- 5.4% M/M). Core PPI, excluding food and energy, dropped by a more moderate 0.1% M/M to an annual level of 1.8% Y/Y. So despite the steep drop in output during the recession, there are very few signals of a deflationary price trend at the producer’s level, even if core prices are trending lower. A similar message comes out of the core pipeline price indices. Core intermediate PPI was up for the last 4 months and core crude prices even for the last 6 months.


Other: UK budget deficit at record high level

In September, M4 money supply slowed from a downwardly revised 12.1% Y/Y to 11.3% Y/Y, broadly in line with expectations. Britain suffered to biggest budget deficit for September since records started in 1993. Net borrowing rose from a downwardly revised £14.7B to £14.8B, but the consensus was looking for an even higher deficit (£15.5B). The public sector net cash requirement, on the contrary, surprised on the upside of expectations rising from £10.5B to £19.4B, compared with £13.3B last year. The detail show that government receipts dropped by 6.3% Y/Y, mainly due to lower taxes from corporate profits (-27% Y/Y), while VAT taxes dropped by 0.5% Y/Y and income taxed fell by 5.6% Y/Y. Government spending rose by 5% Y/Y as spending on social benefits (due to rising unemployment) increased by 9.7% Y/Y.