U.S. Pending Home Sales at Highest Level in Nine Years A forward-looking indicator of home sales rose to its highest level in more than nine years in May, a sign the housing market is gaining traction after a shaky start to the year.
The National Association of Realtors said Monday its index of pending home sales increased 0.9% to a seasonally-adjusted 112.6, the highest level since April 2006. The index tracks contract signings, which usually close within two months.
The April index was revised down to 111.6 from 112.4. (…)
Pending home sales rose 6.3% in the Northeast and 2.2% in the West but fell 0.6% in the Midwest and 0.8% in the South. (Chart from Haver Analytics)
The European Union’s statistics agency Tuesday said consumer prices in June were 0.2% higher than a year earlier, a reduction in the rate of inflation from 0.3% in May, and further away from the ECB’s target of just under 2%.
The core annual rate dropped to 0.8% from 0.9% as the rise in services prices slowed to 1.0% from 1.3% on the year.
Having risen a buoyant 1.2% in April, some payback in May was always likely, but the 2.2% drop in Japan’s industrial production seen last month was far larger than consensus expectation of a 0.8% decline. The disappointing data call into question Japan’s ability to sustain its rebound from last year’s brief recession, corroborating the bout of renewed weakness seen in the country’s manufacturing PMI survey.
The official data mean that, having risen 1.6% in the first quarter, industrial production is currently on course to drop by 1.6% in the second quarter, wiping out all the gains from the positive start to the year. Even a strong number in June will do little to improve the second quarter performance. The government’s survey indicates that manufacturers expect to increase production by 1.5% in June, but that will merely take the overall quarterly decline to 1.5%.
The official data follow the flash manufacturing PMI, which fell below 50 to finish off the worst quarter for two years in June.
The data flow in recent months is therefore suggesting that the pace of economic growth slowed significantly in the second quarter compared to the surprisingly strong 3.9% annualised expansion recorded in the first three months of the year. Consumer spending has continued to be hit by last year’s sales tax rise and exporters are struggling in the face of sluggish demand in overseas markets.
However, rays of hope were provided by a stronger than expected 1.7% rise in retail sales during May (taking sales 3.0% higher than a year ago). A similar upturn was seen in the PMI survey’s measure of orders for consumer goods, which hit a 14-month high in May. The services PMI – which is more domestically-influenced than the export-led manufacturing PMI – has also been signalling modest growth in April and May. More will become known about the strength of demand and economic growth momentum heading into the third quarter with the publication of final PMI data for manufacturing and services this week.
Part of Japan’s problem is China:
China is capable of “maintaining mid- to high-speed growth” despite challenges, Premier Li Keqiang said on Friday.
The nation’s economic fundamentals were performing well, Li said, adding that the economy is running “within a reasonable range“.
He said major economic indexes since May, including those for industrial production, investment, consumption, and exports and imports have remained stable or increased, while employment has also improved. (…)
China is getting a strong tail wind from lower oil prices which is helping lower inflation close to 1% YoY while wages are rising at a much faster pace. Hopefully this will shortly revive consumer demand as:
- China Auto Sales Volume Y/Y Growth Drops Into Negative Territory
Starting in 2Q15, auto sales volume growth has dipped into negative territory. Year-over-year sales volume growth for the month of May was reported at -0.4%, an uncommonly low growth number within the period that official statistics for auto sales have been available. Given the falling sales volume in Q2, YTD Y/Y sales volume growth was only 2.2% in May. In recent years, annual sales volume growth expectations have been set within a range of 5% to 10%. This year, however, sales growth has fallen below the lower limit for expected sales growth.
Looking at auto sales volume composition, sedan sales volume growth decelerated significantly in Q2. In the month of May, sedan sales volume growth was -10%, approaching a historical low of -12% recorded in 2008, during the Global Financial Crisis. Looking at truck and transport van sales volume, a recovery from -20% growth in the beginning of the year has been observed. However Y/Y growth during May remained in negative territory at roughly -10%. The SUV segment has been the lone bright spot in terms of sales volume growth: monthly Y/Y sales growth and YTD Y/Y sales growth has been maintained at an elevated level of 40%. (CEBM Research)
- Bloomberg GDP tracker points to 6.5% growth
Our GDP tracker put growth at 6.55 percent year on year in May, up from 6.4 percent in April. That reflects a slight acceleration in industrial output, underpinned by rapid growth in infrastructure spending. A turnaround in property sales is another hopeful sign. We believe growth will stabilize in the months ahead. (…)
Overcapacity in industry and empty apartments in the property sector dent the prospects for investment. Our calculations suggest fundamental demand in the real estate sector is about 8 million units a year. Supply is currently about 10 million units. A contraction in construction as supply comes into line with demand is another reason to be pessimistic about medium-term growth.
Throw a shrinking working-age population into the mix and it seems that even with successful reform, the engines of growth will continue to sputter. Our forecast puts potential growth in 2020 at about 6.5 percent. Others are less optimistic, with a vocal minority expecting a much sharper slowdown on a scenario of reform failure and financial sclerosis.
China at pains to calm stock market Rules drafted to let state pension funds invest in equities
(…) Earlier on Tuesday, the Asset Management Association of China issued a statement titled: “Beautiful sunlight always comes after wind and rain,” urging members to “seize the investment opportunity” following a near 25 per cent fall in the Shanghai market over the past fortnight.
“As we pursue personal profit, we should also pay attention to others’ profits and not abandon our integrity as we grab for riches, not kill the goose that laid the golden egg,” the industry body said.
The government itself has also been intervening to soothe fears of a stock market collapse. Late on Monday, China’s securities watchdog said that an “excessively fast correction” was not healthy, while the finance and social security ministries published draft rules that would permit the state pension fund to buy stocks. Such a move could allow up to Rmb600bn ($97bn) to enter the market. (…)
In addition, there were indications that Central Huijin, the main state-owned financial holding company, had moved to anchor demand for blue-chip stocks by buying Rmb10bn in large-cap exchange traded funds on Monday.
Meanwhile, the S&P 500 Index has dropped 3.5% since June 18 to sit on its still rising 200 day m.a.. Coincidentally, this is right on the Rule of 20 fair value line.
Good piece from Deutsche Bank if you want to know a lot more about the Greek tragedy (HT ben Hunt).