Today: Weak U.S. retail sales. Weak Europe.
FRIDAY’S OCTOBER RETAIL SALES REPORT COULD DISAPPOINT
Weekly retail sales remain very weak in spite of a 22% plunge in gas prices since the summer. Weekly sales are showing no strength whatsoever: the 4-week moving average was up only 2.6% YoY at the end of October and is up a low 2.2% to last weekend.
Retailers have already begun Black Friday promotions with WMT announcing its own Black Week.
Eurozone Output Points to Weak Third Quarter Factory output across the 18 countries that share the euro only partly rebounded in September, a sign that economic growth remained weak in the third quarter.
Eurostat said production by factories, mines and utilities during September was up 0.6% from August, and 0.6% higher than the same month in 2013. However, the pickup failed to reverse a 1.4% decline in August, suggesting it is possible that output in the third quarter as a whole will be lower than in the second quarter, when it grew modestly.
(…) “Since the summer months, incoming data and survey evidence have overall indicated a weakening in the euro area’s growth momentum,” ECB President Mario Draghi said Thursday. (…)
Since the summer months! IP has been weak all year. It was down 0.2% in Q2 and is up 0.1% in Q3. German IP was down 0.7% in Q2 and is flat in Q3. Perhaps Draghi was referring to core retail sales which rose 0.5% in Q2 (2% a.r.) but tanked 0.7% (-2.8% a.r.) in Q3 with Markit’s retail PMI indicating a “solid decline” in October. BTW, German retail sales cratered 3.2% in September, –2.6% in Q3. That’s a –10.8% annualized rate!
That said, the ECB will likely wait for more data…
EU autos sector moves into reverse gear at start of final quarter
Markit’s automobiles & auto parts PMI for Europe showed a decrease in production for the first time in 18 months in October. The contraction represented a marked turnaround from the strong performance seen in the sector at the start of the year when output growth was the fastest for over two-and-a-half years.
Weighing on activity levels in the second half of the year has been renewed weakness in incoming new orders at autos firms. New orders have fallen in four of the past six months, dropping in October to the greatest extent since March 2013. New export business* also fell in October, down for the second month running.
These latest gloomy PMI figures follow data from the ECB showing new passenger car registrations rising at the slowest annual rate for 12 months in September. Adjusted for working days, car registrations rose just 3.2%, down from a 5.9% year-on-year increase in August. With latest PMI data pointing to weak demand and renewed job losses in the euro area and economic growth at a 16-month low in the UK in October, the likelihood is that the slowdown has continued into the final quarter.
New car registrations set to fall?
Facing falling orders and rapidly shrinking backlogs of work, autos firms in Europe have begun taking up more defensive positions. October saw input buying fall for the second month in a row, contributing to a further drop in inventories. Employment across the industry ticked up slightly during the month following little change in September, though the rate of job creation paled in comparison with that seen earlier in the year. Meanwhile, the survey pointed to a drop in average output prices by auto producers, in a sign that businesses are lacking pricing power and having to offer discounts in order to encourage sales.
OECD Points to Eurozone, U.K. Slowdown
Economic growth is set to slow in the eurozone and the U.K. over coming months, while remaining at current modest rates in most of the world’s other large economies, according to leading indicators released Wednesday by the Organization for Economic Cooperation and Development.
Saudi Arabia Leads OPEC Oil Output Lower as Next Meeting Looms OPEC said Saudi Arabia led declines in the group’s oil output last month, weeks before the 12 nations meet to decide whether to trim a global supply glut that drove crude prices into a bear market.
Saudi Arabia’s production fell 69,900 barrels a day to a six-month low of 9.603 million, the Organization of Petroleum Exporting Countries said in a monthly report. The data are based on estimates from sources including analysts and media organizations. OPEC’s members pumped 30.253 million barrels a day, a decrease of 226,400 barrels, the largest since March. There are signs of global economic recovery, it said.
Yellen promises clear communication of interest rate policies