European Economics Preview: Eurozone CPI Data Due

Thursday, major statistical reports due for the day include consumer prices data from Eurozone and Italy.

At 2:00 am ET, retail sales data for August is due from Finland. Sales had dropped 0.3% year-on-year in July. In the meantime, EU 25 new car registrations report is also due.

At 3:00 am ET, the Czech Statistical Office is slated to release producer price data for September. Prices are expected to drop 5.2% year-on-year, larger than the 5.1% decline seen in the previous month. Czech import and export prices data for August is also expected at the same time.

In the meantime, the Turkish statistical office is scheduled to issue unemployment data for July. Economists expect the unemployment rate to ease moderately to 12.9% from 13% in the preceding month. Further, Slovakia is set to release harmonized consumer price data for September at 3:00 am ET.

Half an hour later, retail trade figures for August is due from Statistics Netherlands. Sales are expected to drop 4% annually, faster than the 3.6% fall in July.

At 4:00 am ET, the European Central Bank is expected to release its monthly bulletin.
At the same time, the Italian statistical office ISTAT is scheduled to release the final report for September CPI. The preliminary estimate showed that consumer prices rose 0.2% on a yearly basis in September. Meanwhile, the HICP climbed 0.3% in September from the previous year. The statistical office is expected to confirm the preliminary estimate.

Also due at 4:00 am ET, is September’s trade data from Norway. The trade balance logged a surplus of NOK 24.9 billion in August.

At the same time, Austrian consumer price inflation data for September is also due. In August, the inflation rate stood at 0.3% on a monthly basis and 0.4% on a yearly basis.

At 5:00 am ET, the Eurostat is expected to release a revised report for Eurozone HICP. Eurozone consumer prices declined 0.3% on a yearly basis in September. The statistical office is expected to confirm the initial estimate released on September 30.

New York Fed Index Rises To Highest Level In Over Five Years

Conditions for New York manufacturers improved significantly in October, according to a report released by the Federal Reserve Bank of New York on Thursday, with the index of activity in the sector rising to its highest level in over five years.

The New York Fed said its general business conditions index rose to 34.6 in October from 18.9 in September, with a positive reading indicating growth in the manufacturing sector. Economists had been expecting the index to fall to a reading of 17.5.

With the unexpected increase, the business conditions index rose to its highest level since May of 2004, when the index came in at 35.0.

The unexpected increase by the index was partly due to notable improvements in new orders and shipments. The new orders index rose to 30.8 in October from 19.8 in September, while the shipments index jumped to 35.1 from 5.3 in the previous month.

Employment also showed a significant improvement compared to the previous month, with the number of employees index rising to 10.4 in October from a negative 8.3 in September. This marks the first positive reading for the index since June of 2008.

On the inflation front, the prices paid index edged down to 19.5 in October from 20.2 in September, while the prices received index fell to a negative 5.2 from a negative 3.6 in the previous month.

US Borrow And Spend Policies Continue

European industrial output rose for a fourth month in August, increasing just below 1% from July. From a year earlier, August output fell 15.4%, a big drop but still the smallest YOY decline in eight months. The euro (EUR) area continues to recover ‘at a gradual pace’ according to ECB President Trichet. The positive news coming from the manufacturing sector is a good sign the European economic recovery will be sustainable.

Another report overnight showed that China’s exports fell by the least amount in nine months during September. As we have written over and over again, China will lead the world out of the global recession, and the latest reports show China beginning to pull away. Reports due out next week will likely show that China’s economic growth accelerated to 8.9% in the third quarter, slightly above the government’s target.

Australia Business Confidence Declines In September

Business confidence in Australia slipped for the first time in five months, driven by a decline in confidence among retailers and manufacturers, a report released by the National Australia Bank said on Tuesday.

The index measuring business confidence stood at 14 in September, down 4 points from August’s reading of 18. August marked the highest reading recorded in the index in nearly six years. A figure above zero means optimists outnumber pessimists.

The decrease in the index was largely due to the receding confidence among the retail and manufacturing sectors, which fell 6 points and 11 points, respectively, from August, while higher confidence was seen in the construction sector on the back of higher infrastructure spending.

Hong Kong May Modify Land Supply Arrangement

Hong Kong’s government will closely watch and revise its land supply arrangements, if necessary, on rising concern over development of a property bubble in the economy, Chief Executive Donald Tsang said in his annual policy address on Wednesday.

Tsang told the Legislative Council, “The relatively small number of residential units completed and the record prices attained in certain transactions this year have caused concern about the supply of flats, difficulty in purchasing a home, and the possibility of a property bubble.” He noted that property prices returned to their mid-2008 levels, except for luxury flats.

For luxury flats, prices are still below their peak in 1997. At the same time, home purchasing power is greater than in 1997 and the number of negative equity cases remains very small. A steady property market can avoid property owners from being hit hard during an economic downturn.

According to Land Registry, the number of sale and purchase agreements for all building units received for registration in September jumped 95.9% annually to 14,437 units and sales of residential units surged 102.2%.

Hong Kong GDP rose 3.3% sequentially in the second quarter after falling 4.3% in the first three months of the year. That was the first increase following declines in four consecutive quarters. The strong stimulus measures adopted by the Mainland Authorities helped the Chinese economy regain growth momentum, thereby benefiting the Hong Kong economy.

UK Sept. Annual Inflation Lowest Since 2004

UK annual inflation slowed more than expected in September to a five-year low. Also, inflation stood below the central bank’s 2% target for the fourth straight month.

Annual inflation slowed to 1.1% in September from 1.6% in August, the Office for National Statistics reported Tuesday. This was the lowest annual rate since September 2004. Economists had expected the annual rate to ease to 1.3%. Month-on-month, consumer prices remained flat, the lowest monthly change since records began in 1996. Core annual inflation that strips out energy, food, alcohol and tobacco stood at 1.7%, down from 1.8% in August.

The largest downward contribution to the change in the CPI annual rate came from housing and household services, the ONS said. There were also large downward contributions from food and non-alcoholic beverages as well as restaurants and hotels. On the other hand, the largest upward contribution came from transport and clothing and footwear.

Further, the agency said the retail price index, which is used for indexation of pension and state benefits, stood at 215.3 in September, up from 214.4 in August. From August, the retail price index was up 0.4%.

Retail prices dropped 1.4% in September from the same period of last year compared to a 1.3% fall in August. Consensus forecast was for a 1.5% fall. Excluding mortgage interest payments, retail prices were up 1.3%, slower than the 1.4% growth seen in the prior month.

Overall results for the third quarter were encouraging. The survey found that confidence strengthened across the board in the third quarter. Domestic orders and sales also strengthened considerably, especially in manufacturing. However, they remain negative, making it difficult to argue that the UK has already emerged from recession. The cashflow indicator remained negative and still remain weak by historical standards.

UK Housing Market Continues To Strengthen In September

Confidence returned to the UK housing market in September, with the net balance of respondents expecting house price to rise moving up to its highest level since May 2007, a survey showed Tuesday.

Data released by the Royal Institute of Chartered Surveyors showed that a net 22% saw house prices rising rather than falling in the three months ended September, the highest balance in more than two years. This comes after a net balance of 10% in August, and stood higher than economists’ expectations for a balance of 16%.

The biggest gains were seen in London, with a net 79% seeing rise in prices rather than falls, while in the South east, the proportion was 52%. However, a net 18% of respondents saw more price falls rather than rises in Yorkshire and Humberside. In Wales, the net balance was 15%.

On Monday, the Council of Mortgage Lenders said the number of house purchase loans in August totaled 52,700, up 29% from the same period of last year. However, approvals fell 5% from July.
On October 7, Fitch Ratings in a report warned that the recent gains in house prices could provide only a temporary respite and expects the prices to fall from its nearly two year peak. The rating agency forecasts house prices to fall 30% overall from its peak in October 2007, with the prices being currently 13% below that peak, having dipped 19% in the first quarter. The fall would bring it in line with the long-term average, Fitch said.

The latest house price data from Nationwide showed that prices rose for the fifth consecutive month in September. House prices climbed a seasonally adjusted 0.9% month-on-month in September, after a 1.4% rise in the preceding month. Further, the Lloyds Banking Group Plc’s Halifax division said on October 6 that house prices climbed for the third consecutive month in September, by 1.6% on a monthly basis compared to a 0.8% rise in August.

The latest quarterly survey from the British Chamber of Commerce released Tuesday said the decline in economic activity in Britain was coming to an end, although most of the rebound is from historic lows.