In July, US durable goods orders disappointed again. On a monthly basis, durable goods orders rose by only 0.3% M/M, while an increase by 3.0% M/M was expected. The previous figure was however upwardly revised from -1.0% M/M to -0.1% M/M. Even more disappointing were the durables excluding transportation, which fell by 3.8% M/M. Looking at the details, transportation orders rose by 13.1% M/M due to a sharp increase in non-defence aircraft (75.9% M/M). Machinery (-15.0% M/M) and electrical equipment (-5.9% M/M) plunged, but also computers and electronics (- 2.4% M/M) and fabricated metals (-1.0% M/M) dropped significantly. Shipments of non-defence capital goods excluding aircraft fell by 1.5% M/M, the first decline in six months, which might indicate that investment in software and equipment is cooling.
New home sales dropped by 12.4% M/M to a total number of 276 000 in July, a new record low, while the consensus expected them to stay flat at 330 000. Also the previous figure was downwardly adjusted (from 330 000 to 315 000). The regional breakdown shows that weakness was wide-spread as sales fell in all regions. The number of new homes for sale stayed unchanged at 210 000 and month’s supply increased from 8.0 to 9.1 in July. This is another weak report from the US housing market and indicates that activity is very low after investors rushed to take advantage of the tax credit. Also for the coming months, housing activity is expected to remain sluggish as the job market remains extremely weak and money is tight.
EMU: German IFO improves on current assessment
The German IFO business climate indicator continued to improve in August, while a slight decline was expected. The headline index rose from 106.2 to 106.7, the third consecutive monthly increase. The details show an improvement in the current assessment (108.2 from 106.8), while the expectations sub-index fell slightly (105.2 from 105.6). Afterwards, the IFO’s Abberger said that the growth rates from the first half could not be sustained, but no cooling is expected in the second half of the year and added that possible risks for German growth are mainly from abroad. In Q2, the German economy grew at its fastest pace since the reunification, a performance that will be difficult to maintain, but the outlook remains hopeful as consumers are starting to increase their spending (which was confirmed by an improvement in the retail component, which rose from 3.8 to 9.1).
