Softer U.S. Consumer Confidence and House Price Inflation

November 27, 2018

The Federal Reserve’s Vice Chairman, who was sworn in just two months ago, endorsed the policy of gradual interest rate increases. Richard Clarida conceded that the federal funds target is getting closer to neutrality but said that more hikes are warranted.

Clarida’s comments today were juxtaposed against U.S. and other data indicating slower global growth.

The FHFA 12-month U.S. house price increase slid to 6.0% in September from 6.1% in August due to a halving of the month-on-month rise to 0.2%. A 5.5% increase of the Case-Shiller house price index for 20 metropolitan areas fell 0.2 percentage points to a near two-year low of 5.5%. The Conference Board’s monthly U.S. consumer confidence index fell 2.2 points to a 2-month low in November.

French consumer confidence printed 3 points lower in November at a 45-month low of 92.

Italian consumer confidence dropped 1.8 points in November to a 6-month low of 114.8. Italy’s economic sentiment index dropped 1.4 points further to 101.1, with manufacturing confidence  off 0.5 points and construction dropping 6.4 points.

Britain’s distributive trades survey index rebounded to a 2-month high in November from a 6-month low in October.

South Korean consumer sentiment fell 3.5 points to a 17-month low reading  of 96 in November.

Japanese corporate service price inflation remained fairly low at 1.3% in October, having averaged 1.2% over the previous four months.

Chinese corporate profits posted a slightly lower 12-month 3.6% rate of increase during October.

New Zealand experienced larger trade deficits of NZD 1.295 billion in October compared to NZD 0.840 billion a year earlier and of NZD 5.786 billion over the last 12 months compared to NZD 2.967 billion over the previous statement year.

Mexico’s $2.936 billion trade deficit in October was also greater than its year-earlier deficit of $2.251 billion.

And Sweden’s October trade deficit of SEK 8.4 billion surpassed the October 2017 deficit of just SEK 1.5 billion. Swedish producer price data were also reported, yielding on-year prices increases of 9.5% overall, 14.1% for import prices and 6.8% for domestic producer prices.

Finnish consumer confidence improved during November for only the first time since May.

Investors continue to be jittery about a number of developments: relentless, albeit gradual, Fed tightening, the coming end of ECB bond buying, President Trump’s erratically provocative tweets including an accusation that Robert Mueller is behaving viciously, the U.S.-Sino trade dispute, Italy’s fiscal excesses, the possibility that Britain’s parliament will vote down the Brexit accord, and the broad sweep  of xenophobic nationalism around the world.

The DOW lost 0.5% in early trading, but the S&P changed on net hardly at all. Stocks in Europe  are down 0.5% in Switzerland, 0.4% in Germany, 0.3% in France, and 0.2% in the U.K. and Italy. Asian markets performed better with gains of 0.6% in Japan, 0.8% in South Korea, and 0.4% in Indonesia but no change in China.

The dollar is mostly higher, with gains of 0.5% against sterling, 0.2% versus the euro, Aussie dollar and yuan, and 0.1% relative to the yen and loonie but also drops of 0.8% vis-a-vis the peso and 0.3% against the kiwi.

WTI crude oil advanced 0.9% to $52.11 per barrel, while Comex gold is 0.4% softer at $1,224.1 per ounce.

Ten-year German bund and British gilt yields fell two basis points apiece, while their U.S. and Japanese counterparts remain steady.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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