United States

There has been as yet no appreciable spillover into consumer spending from either the eighteen month decline in housing or the much more recent ‘credit crisis’. Retails sales were twice as strong as predicted, and the ex auto was number three times the median forecast. The robust sales numbers in the month before the holiday spending season support higher estimates for GDP growth in the fourth quarter. Inflation concerns reignited with producer prices rising at a 7.2% pace and consumer prices surging 4.3% in November. The prices rises were spread across all categories of goods, led by energy costs. The combination of strong consumption and burgeoning inflation may be enough to keep the FOMC on hold at their next meeting January 30th.


The inflation concerns of the European Central Bank (ECB) proved well grounded as the November harmonized inflation index reached the highest level since monetary union began in 1999. ECB rhetoric over the past several months has not countenanced even a hint at rate reduction but financial market worries will prevent a rate increase any time soon. The bank is likely to be on hold well into the spring of next year.


Faster yuan appreciation and higher interest rates will be part of a new tight money policy in China according to a spokesman for a Chinese government think tank. The Ministry of Commerce estimated that a 1% drop in US GDP growth would slow Chinese export growth by 6.0% . The Chinese government’s biggest concern is continued dollar depreciation, it has put too much pressure on the yuan to appreciate, said Zhu Baoliang from the State Information Center, the government affiliated think tank.

Economic Releases December 10 - 14

United States

Monday: National Association of Realtors (NAR) Pending Home Sales Index for October rose 0.6% to 87.2, the second small monthly gain in a row. This series tracks housing contract activity, a signed contract is not counted as completed until the transaction closes. The index is down 18.4% since last year.

Wednesday: the International Trade Balance deficit for October increased to -$57.8 billion. The deficit with China reached a record -$25.9 billion, with Japan it was -$8.0 billion and with the OPEC countries -$11.0 billion. Exports rose $1.3 billion and imports gained $2.0 billion. The September deficit was revised higher as well to -$57.1 billion from -$56.5 billion. All of the increase was due to the rise in crude oil prices. The volume of oil imports in October rose slightly but the average price in October was $73.49 per barrel, in September it had been $68.51. Excluding energy products the deficit actually shrank in October. With the average price for a barrel of oil even higher in November further increases in the trade deficit are expected. Import Prices jumped 2.7% in November, the largest single boost since October 1990, led by the 9.8% rise in petroleum products.

Thursday: Retails Sales in November proved surprisingly strong gaining 1.2% over October, twice the median forecast and six times the October figure. The ‘ex food and auto’ result was even more pronounced adding 1.8% on expectations of +0.6% and October’s +0.2%. It was the largest rise since January of 2006. There was strength in all categories even building materials posted a gain pf 1.2%. Figures for the prior two months were adjusted higher, the headline ‘sales’ added 0.1% in total and ‘ex auto’ 0.5%. The Producer Price Index shot up 3.2% in November, a +7.2% yearly rate. It was the biggest monthly jump in more than a generation, +1.4% had been predicted. The core rate (without food and energy) added 0.4%, a +2.0% yearly rise, against a prediction of +0.2%. Gasoline prices rose 34.8% in the month and were the biggest driver. But have since fallen somewhat relieving some of the future pressure on prices.

Friday: CPI gained 0.8% in November, far stronger than the expected +0.6% and almost triple the October 0.3% result. The headline CPI is now running at +4.3%. Core CPI added 0.3% for the month, more than the 0.2% forecast and October figure. Core CPI was at 2.3% yearly in November. Industrial Production jumped 0.3% in November, ahead of the 0.2% estimate, but the October number was revised down to -0.7% from -0.5%. Capacity Utilization was 81.5% in November, 81.8% had been forecast, October was 81.7%.


Tuesday: ZEW Survey of economic experts for December fell, 5.7 to -35.7 in the ‘economic expectations’ category and 0.6 in the ‘current conditions’ summary to 59.6. The November readings were -30.0 and 60.2 respectively.

Wednesday: Industrial Production outstripped expectations in October rising 0.4%, 3.8% y/y, on predictions of +0.1% and +3.7%; the September figure was adjusted to -0.8% from -0.7%, the year on year number was unchanged at +3.5%. .

Friday: final HICP inflation for November advanced 0.5% over October and added 0.1% in the year on year reading to 3.1%. The yearly number matches the highest reading since monetary union began in 1999 and matches the May 2001 number.


Tuesday: ZEW Survey of economic experts for December came in well below forecasts and is at the lowest level since January 1993; ‘economic expectations’ -37.2, expected -35.0, November -32.5; ‘current conditions’ 63.5, expected 66.0, November 70.0. ‘Economic expectations’ are now below the long term average of -31.4.

Friday: final HICP rose 0.5% in November as expected, 3.3% on the year. CPI was slightly higher in the final number +0.5%, +3.1% y/y over the preliminary readings of +0.4% and +3.0%. The HICP figure is at an all time high for this harmonized inflation rate; CPI is at a 13 year peak.

United Kingdom

Monday: output producer prices gained 0.5% in November, the biggest jump in 16 years, and a +4.5% rise since last November. A rate of +0.4% monthly and +4.2% had been forecast. Food and fuel were the main culprits. The Monetary Policy Committee (MPC) of the Bank of England (BOE) did not have these figures when it decided to lower rates by 0.25% on December 6th.

Wednesday: the three month average for average earnings growth dropped to +4.0% in October from +4.1% for September; +4.2% had been forecast. The ILO unemployment rate eased to 5.3% in October, down 0.1% from September.


Monday: machinery orders rose 12.7% in October more than double the anticipated 6.2% gain. This was this first positive month since June.

Tuesday: consumer confidence scored 39.8 in November, the lowest reading in almost four years, 43.0 had been expected, October was 42.8.

Friday: the Tankan report for the 4th quarter showed a decline in business sentiment. Large manufacturing firms registered 19, less than the forecast of 21 and off the 3rd quarter result of 23. It is the lowest since the 3rd quarter of 2005. Large non manufacturing firms voted at 16, slightly better than the forecast, 15 but substantially less than the 3rd quarter reading of 20. Economy Minister Hiroki Ota blamed the sagging Tankan on high oil and commodity prices and a strong yen. Small firms exhibited the same weaker prospects as their larger brothers.


Monday: November PPI was 4.6% ahead of the same month last year.

Tuesday: the November trade surplus measured $26.28 billion, a slight decline from October’s $27.05 billion. The January though November surplus was $238.13 billion an astonishing 52% more than the same period last year, $156.52 billion. November CPI was 6.9% higher than a year prior. Once again food prices were the main driver. A gain of 6.4% had been the median prediction; October prices rose 6.5%.

Wednesday: Retails sales were 18.8% stronger in November than a year previously; in October the growth was +18.1%.