New Residential Sales fell by 5.3% percent in October from September’s revised 457K the Census Bureau reported today. Today’s number of 433K is 40.1 percent lower than the sales volume seen one year ago. The sale of new single-family homes has not been this low since the 401K seen in January 1991.

The number of homes for sale at the end of October was also at multi-year lows. It was reported that 381K new homes were for sale across the United States, the lowest since February 2004. However, the reduction in inventories was not enough to reduce the number of months it would take to clear the overstock. At the current sales pace it would take 11.1 months, up from 10.9 months at the end of September. This is the highest number seen since March of this year.

Median sales price was down to $218 000 in October, lower than the 221 700 seen one month previous. The median sales price has not been this low since September 2004 when it stood at £211 600. One year ago, the median sales price stood at $234 300. The average sales price was also down to $272 300 from 283 700 in September.

 

Existing Home Sales in the US fell during the month of October to an annualized rate of 4.98 million units, the National Association of Realtors said today. The median sales price of existing homes also fell, to $183 300.

The fall in sales volume represents a 3.1% drop from September’s revised figure of 5.14M, or a 1.6% decrease when compared to the same time last year.

The biggest monthly reduction in sales was seen in the Midwest (-6.0%), followed by the South (-3.2%), the West (-1.6%) and the Northeast (-1.2%). On a yearly basis the West remains top performer. Today’s 1.21M represents a 37.5% increase on the lowly 880K seen in October 07. However the other three regions remain in negative territory. The Northeast, Midwest and South are down 9.8%, 9.1% and 10.2% respectively.

Inventories of previously owned homes fell by 0.9% in October to 4.23M. However, the contraction in sales pace meant a slight increase to 10.2 from 10.0 months supply at the current sales rate.

Median sales prices posted their fourth straight monthly decline and currently stand at -11.3 percent on the year. A closer look at regional data reveals that the sales increase in the West has come at the expense of prices with -27.0% YoY. The Northeast, Midwest and South are also lower, down 6.1%, 6.7% and 5.8% respectively.

This Week
The working week will be slightly shorter than usual in the US and Japan thanks to bank/ market holidays. The Labour Thanksgiving Day holiday takes place in Japan on Monday, while Thanksgiving Day will be celebrated in the US on Thursday. There is also an early market close at some US exchanges on Friday.

On Monday there will be major news from the Eurozone and the US. At 09:00 the German Ifo Business Climate Index will be announced. The Index is expected to slip to 88.8 from 90.2 in the previous month.

High volatility will come from the US at 15:00 with Existing Home Sales. Traders are expecting the annualized number to fall to 5.02M for the month of October, down from 5.18M seen in September.

Later in the day, at a time yet to be specified, President-Elect Obama is set to hold a press conference to discuss his economic team appointments. Although this event isn’t expected to create high volatility a reaction is expected from traders. This will probably be more evident in the stock market as traders assess the qualifications and suitability of those appointed.

Tuesday will be fairly action packed beginning with quarterly Inflation Expectations from New Zealand. The Reserve Bank of New Zealand survey of business managers is due at 02:00 with a CPI prediction of 3.0% seen at the last release.

High volatility is also expected for the MPC Treasury Committee Hearings at 09:45 on Tuesday. MPC members will testify before the UK Parliament’s Treasury Committee on the latest Inflation Report.

At 13:30 we will see high volatility from the US and Canada. Preliminary US GDP is due with a -0.5% reading expected after -0.3% in the previous quarter.

Canada will be releasing Core Retail Sales with a MoM increase of 0.2% forecast after the -0.3% seen last month. Retail Sales are also due but the Core number is seen as more important.

Later in the day the Conference Board’s US Consumer Confidence Index will be released. High volatility is expected for the indicator which is likely to remain at 38.0 for the second month in succession.

Wednesday will produce the second bout of GDP data for the week. The UK will announce its revised GDP reading for the 3rd quarter. No revisions are anticipated for the final reading so it is likely that UK GDP contracted by 0.5% in Q3.

At 13:30 there will be a US double header with Core Durable Goods Orders and Initial Jobless Claims due for release. Core Durable Goods Orders probably fell by 1.4% on the month after a revised 1.0% decline seen in September. Initial Jobless Claims will be closely watched after the 542K 16-year high last week. A slightly lower number of 530K is anticipated this time around.

At 15:00 we will see US New Home Sales. If analyst expectations are correct the annualized pace of New Home Sales will fall to 443K from 464K in September.

Rounding off a busy Wednesday will be the New Zealand Trade Balance. Expectations are for a narrowing of the trade deficit to 1000M from 1183M New Zealand Dollars.

As we have already discussed, Thursday will be slightly quieter than usual with the US holiday but we will have several important releases. First up at 00:30 is Private New Capital Expenditure from Australia. Expectations are for a 0.5% quarterly growth in private business expenditure, down from growth of 5.7% in the previous quarter.

At 02:00 we will see the National Bank of New Zealand Business Outlook report. The survey of business confidence came in at -42.3 last month.

At 07:00 we will see the UK’s Nationwide House Price Index. Average home prices in the UK continue to decline with a monthly fall of 1.7% expected according to the high street mortgage lender. This comes after a 1.4% decline in September.

After a quiet afternoon session New Zealand’s Building Consents are due for release. A monthly increase of 8.4% was seen in September.

Friday will be a quiet end to the week with only one high volatility event scheduled. The Confederation of British Industry (CBI) Realised Sales index is expected to show further decline in sales volume throughout British Industry. The index is expected to read -35 after -27 seen last month.

The US Consumer Price Index fell by the highest amount since monthly records began in 1947, the Bureau of Labor Statistics reported today.

The seasonally adjusted CPI for All Urban Consumers (CPI-U) fell by 1.0% MoM in October, worse than the -0.8% economists had expected. This leaves the YoY number at 3.7%, down from the 4.9% seen in September. Incidentally the YoY growth of 3.7% in the smallest increase in a year.

Leading the index lower were Energy (-8.6% MoM) and Transportation (-5.5% MoM). The compound annual rate for the 3 months ending in October makes interesting reading for these two sectors. Transportation is down 26.2% while Energy has fallen a whopping 43.1%. On an annual basis these two components now stand at 4.2% and 11.5% respectively.

Elsewhere the Core Consumer Price Index came in worse than expected at -0.1%. Consensus estimates had been for a 0.1% MoM increase. The Core rate strips out the volatile Food and Energy sectors and is the Fed’s preferred inflationary indicator.

As you might expect, today’s number gave little encouragement for interest futures which continue to fully price in a 0.50% cut at the Fed’s December 16th meeting. This would take the Federal Funds Rate to 0.50% a full 4 percent lower than this time last year.

US PPI fell by a record 2.8% in October the Labor Department reported today. Gasoline prices and the first drop in food prices in 8 months contributed heavily to the number.

The 2.8% fall in the Producer Price Index for finished goods was led by a 12.8% drop in Energy prices. This is much worse than the -2.9 and -4.6% seen in the previous 2 months. Foods were also down, by 0.2% on the month. This represents the first decline since February of this year.

On closer inspection we can see that gasoline prices crumbled by 24.9% in October after just a 0.5% decrease a month earlier. Leading the finished consumer foods lower was meat, down by 5.6% versus a 0.6% fall one month previous.

Today’s number leaves the Producer Price Index for the 12 months ended in October at 5.2%, down from last month’s 8.7%. The YoY number peaked at 9.8% in July this year.

US PPI MoM for the last 12 reporting periods

Despite the rapid decline in overall prices for finished goods, the Core number (excluding foods and energy) recorded a 0.4% MoM increase. This is inline with Septembers 0.4% increase, but only half of July’s 0.8% number.

Today’s news has done little to change trader’s view of a large interest rate cut from the Fed in December. It would seem that the markets are far more focused on the negative economic outlook than inflation data.

Currently, interest rate futures are fully pricing in a 0.50% cut in the Federal Funds Rate to 0.50% at the next meeting with a minimal chance of a 0.75% cut.

Last Week
Last week was characterised by further weakness in Sterling as BOE Governor King confirmed that more rate cuts are coming “if that proves to be necessary”. The BOE Inflation Report also confirmed that inflation will fall to “well below” the Bank’s target 2.0% in two years time. At the present time the market is expecting the UK Official Bank Rate to hit 2.00% by mid 2009.

On the other hand, Yen and the US Dollar were firm against the major currencies as economic data proved that the global economy is entering a recession. The GBP USD dove from an early week high of 1.5884 by over 1000 pips to a low of 1.4557. Based on closing prices this represents a weekly fall of 6.09%.

The GBP JPY was also very weak, falling by 7.43% on the week. This time last week one GBP would have bought you over 153 Yen, however the exchange rate currently stands at 143.02.

Other than the UK Inflation Report last week’s major news announcements were Initial Jobless Claims which hit a 7-year high of 516K and US Retail Sales which managed all-time YoY lows. Headline Retail Sales were down 2.8% YoY in October while Core Retail Sales were down by 2.2%. These numbers are even worse than 2001’s post September 11th data.

This Week
Once again the world’s major economies will be active this week with plenty to keep traders occupied. We begin at 23:50 on Sunday with Japanese preliminary GDP QoQ. The data is expected to show that the Japanese economy grew by 0.1% in the 3rd quarter after a 0.7% contraction in the previous period.

On Monday we have Real Retail Sales from Australia at 00:30. This indicator strips out the effects of inflation on Retail Sales. On a quarterly basis traders are expecting a 0.4% increase. In the last quarter Real Retail Sales fell by 0.6%.

Tuesday will be a busy day with Australian, UK, US and New Zealand data due. We begin at 00:30 with the RBA Monetary Policy Meeting Minutes which will offer an insight into the 0.75% rate cut on November 4th.

At 09:30 the UK’s YoY CPI is due. Economists are expecting inflation to fall from the 5.2% seen last month to 4.8%.

High volatility from the US begins with the Producer Price Index at 13:30. PPI is expected to post a -1.9% MoM for October after the 0.4% decline seen in September. This is followed by TIC Net Long-Term Transactions at 14:00. Foreign purchases of US securities have been in decline in recent months with a surplus of $18.0B expected in October.

At 14:30 Fed Chairman and US Treasury Secretary Paulson will testify before the US House of Representatives Financial Services Committee on the Troubled Asset Relief Program (TARP). High volatility is expected while the pair are making their remarks.

The data from New Zealand will be in the form of PPI Input. This data measures the rate of inflation experienced by manufacturers when purchasing goods and raw materials. The index came in at 5.6% in September.

Wednesday continues where a busy Tuesday left off. RBA Governor Stevens will speak in Melbourne. His remarks are expected to generate high volatility.

At 09:30 the BOE’s MPC Meeting Minutes will be released. Traders are expecting the vote count to be unanimous in favour of November 6th’s 1.50% interest rate cut.

At 13:30 we will see two high volatility events from the US. Core CPI is expected to show a 0.1% MoM increase in October. This is in-line with September’s number. Building Permits are expected to show a slight decline in the annualized number of residential permits issued. A number of 770K is anticipated for October.

At 19:00 we will have yet more insight into recent central bank rate cuts with the FOMC Meeting Minutes. This release corresponds to the 0.50% rate cut seen on October 29th.

A busy week for the UK continues on Thursday with October’s Retail Sales number due. A MoM decline of 0.9% is expected, steeper than September’s 0.4% fall.

Particular interest will be paid to this week’s Initial Jobless Claims report from the US at 13:30. As we have already mentioned, claims hit a 7-year high last week at 516K with a slightly lower number of 508K likely this week.

On Friday morning the BOJ Interest Rate Statement will be released. Rates are expected to remain on hold at 0.30% with the BOJ Press Conference likely to be the high volatility event.

The final high volatility event of the week will come from Canada with the Core CPI release. September saw a 0.4% increase with October expected to be completely flat at 0.0%.

For further information and updates be sure to visit our economic calendar. This week US PPI, BOE MPC Meeting Minutes, US Core CPI and Canadian Core CPI will all be supported by our visual analysis and historical data tool.

 

Last Week
The BOE surprised traders last week when its Monetary Policy Committee (MPC) decided to cut interest rates by 150 basis points to 3.00%. The market had been expecting a much less aggressive cut to 4.00%. This move fuelled speculation that the BOE will need to cut rates at a faster pace than other central banks and heightened the likelihood that the Official Bank Rate will eventually reach 0.00%.

As you might expect, the GBP closed lower on the week against all other major currencies on the back of this speculation. Although the existing Sterling bearish trends remain in consolidation there are absolutely no signs of a reversal in the medium to long term. The Pound’s value over the coming months will depend on the pace at which the ECB, Federal Reserve and others slash rates. However, the ECB has demonstrated much more measured cuts and the Federal Funds Rate already sits at 1.00% with very little room to the downside.

In the US, Barack Obama became the first African-American President of the United States with 53% of the popular vote. One thing is for certain, he is unlikely to experience any honeymoon period when he is sworn in come January. He will be more than aware of the disappointing economic data coming out of the United States last week.

US Non-Farm Employment Change came in worse than expected at -240K compared to the -200K expected. To make matters worse, September’s data was revised down 125K to -284K. September and October’s data together make the worst two-month series since 2001. Unemployment also surged to the highest level since 1994. It now stands at 6.5%, much worse than the 6.3% expected and 6.1% seen in September.

This Week
The high volatility begins in the early hours of Monday morning this week with Australian Home Loans and the RBA Monetary Policy Statement. September’s Home Loans came in at -2.2% and a further MoM drop of 2.7% is expected to have occurred in October.

Also on Monday we have PPI Input from the UK. This data measures inflation in the prices paid by manufacturers for goods and raw materials. PPI Input is expected to come in at -2.6% MoM for October, compared to -1.2% the month previous.

High volatility from North America is also expected with Canadian Housing Starts expected at 13:15. In September construction on 218K new residential buildings began (annualized) with this number expected to fall to 202K in October.

Monday evening will play host to PPI Input from New Zealand. Prices in September increased by 5.6%.

Tuesday will be fairly quiet this week with French, US and Canadian bank holidays. Although some stock exchanges will remain open large banks will not. Low volatility is likely throughout the Forex market.

At 10:00 we will see high volatility from the German ZEW Economic Sentiment reading. A reading of -62.5 is expected, slightly higher than the -63.0 seen the month before but the index is fixed firmly in pessimistic territory.

At 20:00 the Reserve Bank of New Zealand will release its Financial Stability Report. The report is released twice per year and a press conference is usually held at the release time.

On Wednesday we will see employment data from the UK with Claimant Count Change regarded as most important. It is expected that 40K more UK workers are out of employment, and consequently claiming unemployment benefit when compared to a month earlier.

More high volatility will come from the UK at 10:30 with the BOE Inflation Report due for release. Of course traders will be watching this report closely because it explains the Bank’s view of inflation over the coming two years. However, further interest cuts in the UK may already be set in stone despite these inflation projections.

At 21:45 we will see Core Retail Sales and Retail Sales from New Zealand. The core number is expected to fall by 0.1% MoM compared to a 0.8% increase in September, while the headline number should grow by 0.1% on the month. Growth of 0.4% was seen in the month of September.

Thursday will see Germany deliver its second high volatility release of the week with preliminary quarterly GDP. The German economy is expected to have contracted by 0.2% over the last quarter.

At 13:30 we will see Trade Balance data from the US and Canada. The US trade deficit probably shrunk slightly in October from $59.1B to 56.5B. In Canada, trade surplus is expected to have fallen by CAD 700M to 5.1B.

After a fairly quiet week the US will finish with a flurry of high volatility with no less than 4 such events on Friday, although it does share one of these with the Eurozone.

At 13:30 we will see Core Retail Sales and Retail Sales releases. The core number likely fell by 1.1% on October when compared to -0.6% in September. Headline Retail Sales are expected to have fallen by 2.0% over the same period.

Also at 13:30 we have Fed Chairman Bernanke and ECB President Trichet taking part in a panel discussion at the 5th ECB Banking Conference in Frankfurt. The discussion will be on the topic of "International Interdependencies and Monetary Policy - a Policy Maker's View".

To round up the week we will see preliminary University of Michigan Consumer Sentiment with a reading of 56.0 expected.

Without a shadow of a doubt next week’s major news story will be the election of the 44th President of the United States. Who will it be, McCain, Obama? We will have to wait until late Tuesday or the early hours of Wednesday to find out but the US Presidential Election is bound to dominate news wires this week.

So how will financial markets react? Generally speaking, domestic markets attempt an optimistic rally when new leaders are elected. Of course this relies on the premise that policies and conditions facilitating economic growth were bad/ worse under the previous management.

Taking this into account, are we seeing some “buy on rumour” type trading in the US stock market? Last week the S&P 500 and the DOW both had their largest rallies since 1974, up by more than 10%. There seems little doubt that the financial rescue plan is playing a huge part in this relief rally but the market also seems to be responding favourably to Obama’s 7-point lead in the polls.

Last Week
If traders were paying strict attention to last week’s economic releases they may have been forgiven for thinking a stock market rally lacked fundamental justification. This is because 4 out of the 5 high volatility economic indicators released last week pointed to economic slowdown. Consumer Confidence, Core Durable Goods Orders and GDP data all pointed towards contraction while the Federal Funds Rate was slashed by a further 0.50% to 1.00%. Only New Home Sales managed to post MoM growth. Worryingly however, median prices fell to a new four-year low.

This Week
This week’s first high volatility event will arrive on Sunday at 21:45 with New Zealand’s Labour Cost Index. On a quarterly basis the index is expect to increase by 0.8%, in line with that of the previous quarter.

In the early hours of Monday morning we will see Australian Retail Sales Trend. Monthly growth of 0.2% is expected after September’s 0.3% rise.

The rest of the day will be dominated by manufacturing data. The UK’s Manufacturing PMI is due at 09:30 with economists expecting a reading of 40.0. Anything below 50 represents industry contraction so Sterling traders will welcome surprises to the upside.

At 15:00 the US ISM Manufacturing PMI is due to be released. September’s reading was 43.5 and the contraction is expected to deepen in October with a 41.6 consensus estimate.

At 16:00 in the UK we will hear testimony from BOE Governor King, Chancellor of the Exchequer Darling and FSA Chairman Turner on the recent banking crisis. The trio are due to testify before Parliament’s Treasury Committee, in London.

Aside from the US Presidential Election, Tuesday will be fairly quiet on the economic front. In the early hours of the morning we are due to see further tightening of global interest rates as the RBA’s Interest Rate Statement is expected to reveal a further half point cut to 5.50%. This represents a fall of 1.75% since August this year.

Wednesday will be a much busier day beginning early with Australian Building Approvals and Trade Balance. Following on from a 3.7% MoM contraction in the number of permit approvals in September, October’s rate is also expected to fall, by 1.1%. Trade Balance will likely fall to 0.50B AUD from 1.36B previously.

At 09:30 the UK’s manufacturing Industry will come under further scrutiny courtesy of Manufacturing Production which is expected to fall by 0.4% MoM. At the same time Services PMI is expected to reflect further contraction, dropping from 46.0 to 44.5.

As a precursor to official data from the Bureau of Labor Statistics later in the week, ADP’s Non-Farm Employment Change will be closely watched at 13:15. Economists are expecting a reading of -100K in the number of employed people in October.

At 15:00 the ISM Non-Manufacturing PMI is expected to worsen from minor expansion in September to 47.3, a reading that would indicate contraction in October.

New Zealand employment data comes to the fore on Wednesday evening at 21:45. Employment Change and Unemployment Rate are both due to be released. Employment Change is expected to show 0.8% fewer people were in employment over the previous quarter. This data contributes to the expected sharp increase in the Unemployment Rate to 4.3% from 3.9%.

Hot on the heels of similar data from New Zealand, Australia will report Employment Change and Unemployment Rate at 00:30 on Thursday morning. It is expected that the Aussie economy shed 10K jobs in October with Unemployment duly up to 4.4% from 4.3% in September.

The BOE Interest Rate Statement is due at 12:00 with the MPC expected to cut the Official Bank Rate to 4.00% from 4.50%. The Global interest rate focus will remain intact at 12:45 with the ECB Minimum Bid Rate Announcement. The ECB is also expected to cut by half a point, down to 3.25% from 3.75%. Traders will be very interested in the ECB Press Conference at 13:30 for an insight into ECB sentiment and the possibilities of further rate cuts.

Also due at 13:30 is Canadian Building Permits data. September saw a huge 13.5% fall in the number of permits issued with another 1.3% fall expected in October. Also from Canada at 15:00 is they Ivey PMI. This indicator attempts to reflect the health of the economy as a whole and expansion is expected to slow to 56.0 from 61.0 previous.

Friday’s focus will be on data from North America with Canadian Employment Change and Unemployment Rate getting things started at 12:00. The Canadian economy impressively added 106.9K jobs in September with 10K less jobs expected for October. Unemployment Rate is expected to worsen slightly, up to 4.2% from 4.1%.

At 13:30 we will see one of the most highly anticipated releases in the economic calendar. Non-Farm Employment Change from the US is expected to show 200K fewer employed people in October after 159K less in September. Unemployment rate, due at the same time, is expected to worsen from 6.1% to 6.3%.

There will barely be time for the dust from Non-Farm Payrolls to settle before Pending Home Sales are released at 15:00. With September’s MoM increase of 7.4%, sales in October likely fell by 3.4%.

This week will be rounded off by the New Zealand Parliamentary Election on Saturday. Although the impact on global markets will be limited there should be some effect on the New Zealand Dollar early next week.

The median sales price of a new home fell to a new four-year low of $218, 400, the US Census Bureau announced today.

The value of US consumers’ homes is closely related to their wealth, consumer confidence and consumer spending. While prices continue to fall there seems to be little hope of a near-term economic recovery.

The headline New Home Sales number beat analyst expectations of 452K, coming in at 464K annualized. This represents a 2.7% increase from August’s downwardly revised 452K sales. However, sales are still 33.1% lower than at the same time last year.

Contracting prices does seem to be restoring some demand to the housing market with 7.3% shaved from the inventory of unsold homes. At the current sales pace it would take 10.4 months to clear the 349K strong inventory. This is considerable better than the 11.4 months seen in August.

Sales in the West saw the biggest increase up to 108K from 88K previous while the South climbed to 269K from 267K in August. Sales in the Mid-West and North-East contracted, down to 65K and 22K from 69K and 28K respectively. The drop of 21.4% seen in the North-East brings the region to a record low annual sales pace.

Existing Home Sales in the United States outpaced economists’ expectations in September as they rose by the fastest pace in five years, the National Association of Realtors reported today.

Sales in September increased to 5.18 million units annualized, a MoM increase of 5.5%. 5.18M is the highest number seen since the 5.50M seen in August 07.

Sales in the West grew by the largest margin, up 16.8% on the month, 34.4% on the year. The Midwest managed a 4.4% gain with the South registering 2.2%. The Northeast was the only region in negative figures, down 1.2% on the month.

The positive news of an increase in sales was slightly diminished by the lowest median price of a previously owned home seen in four years. Down 9.0% on the year the median price now stands at $191, 600.

The largest fall was seen in the West with prices off by 18.5% on the year, followed by the Midwest down 7.9%. Median prices in the Northeast are down by 5.4% to $246, 800.