Friday's News Recap: Optimism Returns Following U.S. Housing, Durable Goods Data

News Recap | Written by CEP News | Jul 25 08 20:52 GMT |
(CEP News) - In contrast to Thursday's downbeat releases, markets received largely positive U.S. economic data on Friday in the form of higher-than-expected home sales in June, an upside revision in the final July consumer sentiment survey from Reuters and University of Michigan and a higher-than-expected increase in durable goods sales.

New home sales came in higher than expected at 530k in June against forecasts for a 503k reading, though due to revisions in the previous month the figure represents a slight decline of 3k, or 0.6%. May sales were revised up to 533k from an initially-reported 512k, the U.S. Census Bureau reported. April's new home sales were also revised up to 542k from a previously reported 525k. The median sale price of new houses sold in June was $230,900, up from May's revised median of $227,700.

Sal Guatieri, senior economist at BMO Capital Markets, said the report "paints a brighter picture (than previously portrayed), in the new housing market anyway." Yet he cautioned against being too optimistic, as things are still getting worse but only at a slower decline than in the past two years. He said sales in both existing and new home sales appear to be stabilizing, but there's no sign yet of an actual pick-up or recovery.

U.S. durable goods excluding transportation soared by 2.0% in June in the U.S. durable goods report released Friday by the Department of Commerce. Economists, who were expecting a 0.2% monthly decline following May's upwardly revised 0.5% decline, say the unexpected jump suggests the business sector remains stable despite the broader financial turmoil, thanks in part to foreign demand from a weak U.S. dollar.

Senior rates and economics strategist Eric Lascelles from TD Securities said the release was a "real surprise to the upside," but that the U.S. business sector is not where to look to note the economic slowdown.

The final consumer sentiment survey from Reuters and the University of Michigan received a large upward revision from preliminary estimates in July, with the headline indicator coming in at 61.2 compared to the preliminary 56.6 level.

Economists had expected a small revision to 56.4. The last time the survey reached 61.2 was in May 2008. Consumer expectations were revised to 53.5 from the preliminary 48.3 level, while the current conditions index bumped up to 73.1 from the initial estimate of 69.5 for July.

On the down side, however, U.S. home foreclosures soared by 121% in second-quarter year-over-year results, according to a report issued by RealtyTrac. There were 739,714 foreclosure filings in the second quarter of 2008, a 14% quarterly increase. According to RealtyTrac, 48 of 50 states and 95 of 100 of the largest metropolitan areas experienced year-over-year increases in foreclosure activity in the second quarter.

The Canadian government reported a $500 million deficit in the first two months of the 2008-09 fiscal year, due to shrinking revenues and rising expenses. The budget shortfall was smaller than the March deficit of $1.2 billion, but a reversal from April and May of 2007, when the government reported a $2.8 billion budgetary surplus for the two months.

The federal fiscal monitor released Friday by the Department of Finance showed that the government eked out a $300 million surplus in May, but that wasn't enough to offset April's $900 million shortfall.

Speaking to reporters in Toronto, Canadian Finance Minister Jim Flaherty said the Canadian economy and budget were "on track" in anticipation of the finance ministry's fiscal update in October. The finance minister added that he agreed with the Bank of Canada's assessment that the risks to the economy were balanced.

Air Canada must form a joint committee with its workers to look at ways to minimize the impact of planned layoffs, Canada's Federal Labour Minister Jean-Pierre Blackburn said Friday. Blackburn refused to grant the airline a waiver from the group termination provisions of the Canada Labour Code. In June, Air Canada announced its plans to cut 2,000 jobs in a bid to save money in the face of rising fuel costs. The group termination provisions under the labour code require that an employer that intends to dismiss 50 or more employees in any single industrial establishment within a four-week period give notice to the Minister of Labour, union representatives and non-unionized employees at least 16 weeks before the termination date.

In overnight news, according to advance estimates from the Office for National Statistics (ONS), the UK economy grew 1.6% year-over-year as expected in the second quarter of 2008, down from the 2.3% growth rate seen in the previous quarter. In quarterly terms, UK GDP increased 0.2%, also in line with expectations, after rising 0.3% in Q1.

German import prices rose 8.9% year-over-year in June, the strongest rate since November 2000, according to data released by the Federal Statistics Office (Destatis). Economists had expected an increase of 8.4%, up from May's 7.9% rise. Month-over-month, German import price inflation cooled somewhat to 1.5%, down from the 2.4% rate observed in the previous month.

In an interview from his office in Vienna, Austria on July 24, European Central Bank Governing Council member Klaus Liebscher said that he was not surprised by the recent data pointing to deteriorating activity levels in the euro zone and stressed that the ECB still has room to maneuver regarding interest rates. "We expected a weaker second and maybe third quarter," he said.

According to data released by the Japanese Ministry of Internal Affairs and Communications on Friday, inflation in Japan rose slightly faster than expected in June, but nevertheless sharply from the previous month, with headline CPI rising 2.0% year-over-year in June, just higher than estimates for a 1.9% increase and above May's 1.3% gain.

By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

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