NEWS / Foreign Exchange

US: Weak claims and orders, but home sales higher

Initial claims fell only 8 000 to a still elevated 331 000. While the claims statistics are often distorted, the results of the recent two weeks may indicate that the turmoil in the markets and the latest economic developments are having an impact on the labour market. We look for confirmation in the payrolls statistics, to be released next Friday. However, it may already be one of the elements on the table of the FOMC that convinces the Fed to cut rates. Continuing claims were unchanged.

Durable goods orders tumbled 1.7% M/M (and -6.6% Y/Y) in September, following a downwardly revised 5.3% M/M in August, earlier reported as -4.9% M/M. Weakness in transportation orders and defence capital orders contributed to the bad figures. The decline was unexpected and also the orders excluding transportation and defence were weak, down 1.3% M/M following a 1.4% M/M decline in August. Shipments of non-defence capital goods less aircraft, gauge for business investment, rose 1% M/M following a 1.8% M/M rise in August. It suggests that business investment might be up 3-to-5% in Q3. The inventory-to-shipments ratio jumped to 1.48 from 1.45 in August. All in all, the report suggests slowing activity in the cyclical manufacturing sector.

New Home sales rose by 4.8% in September to 770 000 (the expected result), but only after the August result was massively revised down to 735.000, the lowest level since October 1996. Median prices were up, while average prices down. Positively, the number of homes available for sale declined albeit modestly, which led to a decline in the months supply. Heavy discounting might explain part of the ???better??? result, but one should take into account that cancellations are high (and not in the figures). Overall, the report looks a bit better than the ugly Existing Home sales, but needs to be assessed cautiously. The series is volatile, revised by 167 000 in the previous three months and the rise was also completely due to an unsustainable rise by 37.7% M/M in the West, the largest monthly rise since 1981.

EMU: IFO business confidence deteriorates modestly

German business confidence deteriorated slightly in October according to an IFO survey. The headline index dropped to 103.9 from 104.2 in September, marginally better than the consensus estimate of 103.7. The current assessment index fell back to 109.6 from 109.9 previously, while the expectation sub-index virtually stabilized. The outcome of the report was better than the EMU PMI report suggested on Wednesday. IFO said that optimism on export had eased somewhat, but the euro pain threshold for firms had not been reached. Also the French business confidence survey showed a marginal deterioration of confidence, but contained a number of positives too.

Saxony CPI rose by 0.3% M/M and 2.7% Y/Y in October, up from 2.6% Y/Y previously. Sharply higher food prices were the main culprit