IFO Claims "The German Economy is No Longer Running Smoothly"

September 24, 2014

The IFO Institute’s German business climate index dropped 1.6 points to a 17-month low of 104.7.  Such has dropped 6.5 points since April.  Current conditions slid 0.6 points to 110.5 in September, down from 115.3 last April.  Expectations fell 2.4 points to 99.3, 9.5 points weaker than last January.  Manufacturing, construction, retail and especially wholesaling, which plunged 5.1 points on month, each deteriorated in September.  IFO’s services climate index also declined, falling 1.2 points to an 11-month low of 18.9.

Japan’s manufacturing purchasing managers index slid 0.5 points to a 2-month low of 51.7, according to Nomura’s preliminary September finding.  A faster rate of output growth was more than offset by slower expansion in new orders and other deteriorations.  Since poking back above 50 in May, Japan’s manufacturing PMI has registered an average reading of just 51.4.

The dollar is unchanged overnight against the loonie, euro, Swiss franc and yuan.  The greenback lost 0.5% against the Aussie dollar, 0.3% versus the yen, 0.2% relative to the kiwi and 0.1% vis-a-vis sterling.

Share prices rebounded 1.8% in China and rose 0.4% in Hong Kong, 0.3% in New Zealand and South Korea, and 0.2% in Taiwan but fell by 0.2% in Japan and Singapore, 0.7% in Australia, 0.3% in Indonesia and 0.1% in India.  In European markets, stocks have risen 0.7% in Italy, 0.5% in France, 0.3% in Switzerland and 0.2% in Germany but are so far down 0.4% in Spain.

The 10-year German bund yield is currently unchanged at 1.02% but touched 1.00% immediately after IFO’s disappointing data were released.  10-year British gilt and Japanese JGB yields are a basis point lower.

Gold and oil prices have edged up 0.2% to $1,224.20 per ounce and 0.1% to $91.61 per barrel.

New Zealand’s trade deficit of NZD 472 million in August following a NZD 724 million shortfall in June and a NZD 242 million surplus in May was less than half as big as had been forecast by street analysts.  A surplus of NZD 2.018 billion in the twelve months through August 2014 was NZD 4.22 billion better than over the previous statement year.

Australia’s index of leading economic indicators posted a larger 0.5% advance in July.  Such had also risen in May and June.  The index of coincident economic indicators only edged 0.1% higher, however, after a 0.2% rise in June.

France’s index of leading economic indicators rose 0.5% as well in July after stagnating in June.  The index of coincident economic indicators was unchanged in the latest reported month after a 0.2% uptick in June.

Dutch GDP growth in the second quarter was revised upward to 0.7% from 0.5% reported last month.  First-quarter growth was revised to negative 0.3% from negative 0.4%.  GDP grew 1.1% between 2Q13 and 2Q14.  Dutch producer sentiment declined 0.2% in September, however.

Swedish consumer confidence recovered to a reading of 102.4 in September from 96.7 in August, but confidence in manufacturing fell by 3.7 points.

Czech consumer sentiment slid 1.5 points to a 7-month low of negative 5.8 in September.

Italian consumer confidence edged up 0.1 to a better-than-forecast reading of 102.0 in September.

The UBS Swiss consumption indicator weakened significantly to 1.35 in August from 1.67 in July.

Finnish PPI inflation (-0.8%) was more negative in August than in July.

According to MNI, Chinese consumer confidence ticked down 0.1 to 113.2 in September.

U.S. mortgage applications fell 4.1% last week, partly reversing a 7.9% rise in the previous week.  An average 30-year fixed mortgage rate of 4.39% was the highest in four months.

New U.S. home sales data will be released later than morning. 

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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