In September, US existing home sales surprised on the upside of expectations rising by 9.4% M/M to total number of 5.57 million, while the consensus was looking for an outcome of 5.35 million. Both sales of single family homes (9.4% M/M) and condo’s (9.7% M/M) rose significantly in September, while months’ supply dropped considerably (7.8 from 9.3), to the lowest level since March 2007. Looking at prices of existing homes, both median ($174 900 from $177 300) and average ($219 800 from $222 400) prices fell. After the disappointing figures earlier this week, this outcome is an encouraging sign and might indicate that homebuyers rushed to take advantage of the tax credit before it runs out.
EMU: manufacturing expands for the first time in 17 months
In October, both euro zone manufacturing and services PMI surprised on the upside of expectations, according to the first estimate. Manufacturing PMI rose from 49.3 to 50.7, while the consensus was looking for a figure of 50. This is the first time since May 2008 that manufacturing PMI came out above the benchmark level of 50, indicating that the sector is expanding. Services PMI rose from 50.9 to 52.3 in October, the second consecutive month of expansion. In Germany, the IFO indicator came out more in line with expectations. The headline index rose from 91.3 to 91.9, while markets had expected an outcome of 92.0. The improvement was led by the expectations sub-index, which rose from 95.7 to 93.8, while the current assessment advanced only marginally (87.3 from 87.0). These figures confirm that we shouldn’t take the worsening of the ZEW too serious and that business conditions in the euro zone are improving.
Other: UK in longest recession since at least 1955
In the UK, third quarter GDP came out significantly weaker than expected, showing the sixth consecutive quarterly contraction, while markets were hoping to see the UK climb out of recession. On a quarterly basis, GDP dropped by 0.4% Q/Q, while the consensus was looking for an increase by 0.2% Q/Q. The weakness was widespread with declines in three of the main components: total production (-0.7% Q/Q), services output (-0.2% Q/Q) construction output (-1.1% Q/Q) and government (0.0% Q/Q). This outcome came as a serious disappointment to the markets and raises expectations that the Bank of England, which was also hoping to see an expansion, might increase its amount of quantitative easing at the next policy meeting.
