Daily Archives: November 23, 2011 @ 4:46 pm (Wednesday)

U.S. and Eur Data/GDP Downgrades

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Karim writes:

U.S. data on the soft side (October)

  • Most notable is core durable goods orders (capex has been gwth leader of late) falling 1.8% and 3mth annual rate slowing to 4% from 7.3%
  • Core shipments (more important for current quarter growth) down 1.1%
  • Personal spending up 0.1%.
  • Personal income up 0.4% (mostly via wages) and savings rate up from 3.3% to 3.5%
  • Headline Price index-0.1% and core unchanged, so reasonable increase in real incomes. Core PCE Index now 1.5% 3mth annualized vs 2% last month

EUR Composite PMI ‘surprises’ to upside in November, rising from 46.5 to 47.2

  • Interesting that manufacturing (more volatile and more of a leading indicator) much weaker than services.
  • Also, German new orders fall 2.6pts to 42.6

Q4 GDP estimates in U.S. being shaved 0.25-0.50% on the data. Current range 2.5-3.25%.
Failure to extend payroll tax cut would have impact almost entirely in Q1 2012 (annual withholding ceilings typically reached early in the year)-about 1% on GDP.

European estimates are about -1.5% annualized for both Q4 and Q1. Germany among the weakest (due to manufacturing) with estimates in the -2.5% area.

PMI data in Europe has had a very good track record signaling ECB policy rate changes. This data pretty much cements another rate cut next month.

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EU Proposes Intrusive Control of Euro Zone Budgets

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Another prelude to Germany supporting the ECB funding support that will end the solvency issue falling into place:

EU exec proposes intrusive control of euro zone budgets

By Luke Baker and Jan Strupczewski

November 23 (Reuters) — The Commission, the executive arm of the 27-member European Union, presented a draft regulation which would allow it to review draft budgets of euro zone countries by mid-October and ask for revisions if they were not in line with EU budget rules.

The budget drafts of euro zone countries would have to be based on independent forecasts.

The second regulation would create a legal basis for heavy surveillance of policies of a country either already getting emergency financial aid from the euro zone or facing serious financial instability.

“To return to growth, member states need to raise their game when it comes to implementing their commitments to structural reforms, as well as embrace deeper integration for the euro area,” Commission President Jose Manuel Barroso said.

“The goals driving this package — economic growth, financial stability, budgetary discipline — are linked to each other. We need all of them if we are to move beyond the current emergency towards a Europe in which solidarity is balanced by strengthened responsibility,” Barroso said.

Once the tighter oversight and control of euro zone national fiscal policy is in place, the 17 countries now sharing the euro could jointly borrow from the market through “stability bonds.”

The Commission outlined three main options for such joint debt issuance without making any recommendations on which might be best.

“The Commission makes clear that any move towards introducing stability bonds would only be feasible and desirable if there were a simultaneous strengthening of budgetary discipline,” it said in a statement.

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