US: Awful New Home sales suggest housing crash has further to go

February New Home Sales dropped sharply to only 848K annual rate (-3.9% M/M), the lowest since August 2000. January sales were revised lower to 882K, earlier reported as 1.123 M. Consensus was actually looking for an increase to 990K. At the same time, the houses for sale increased sharply pushing supply to 9.4 months, actually the highest since January 1991, when the previous sharp housing recession took place. One slightly better note, prices were up from January, even if median prices remained down in a Y/Y perspective and the composition of sales was skewed to more expensive houses. This report suggests that the housing market isn??™t yet bottoming out and that it will take still lower sales and/or a more protracted period of sales to work off the inventories. Housing data are notoriously volatile and bad weather probably will have had some impact, but the bottom line remains that the housing recession has further to go. While Existing Home sales fared very well in February, also here more stress is expected.

EMU: French business confidence rises back to cycle high

In contrast to the Belgian and Dutch business surveys, French business confidence rose in March. The headline index rose from 107 in February to 109 in March, equal to the cycle high set in April last year. The improvement was mainly due to the manufacturing sector, where orders rose to their highest level since March 2001 and the different output components gained some ground too. Regarding the general outlook for the euro zone economy, we currently tend to favour the Belgian and Dutch business surveys above the French one and as such expect some moderation in growth in the euro zone. Today??™s IFO will tell whether we are right or not.