Thursday's News Recap: U.S. Jobless Claims Soar, U.S. Pending Home Sales Rebound

News Recap | Written by CEP News | Aug 07 08 20:28 GMT |
(CEP News) - North American markets received some mixed data today with the release of worse-than-expected weekly U.S. jobless claims data, but better-than-expected U.S. pending home sales for June. In Canada, the value of building permits dropped sharply in June, while overseas the Bank of England and European Central Bank announced interest rate decisions.

Despite a worse-than-expected U.S. initial jobless claims reading of 455k in the week ending Aug. 2, many economists dismissed the figure, saying much of the boost is due to a change in eligibility rules making it easier for recipients to file claims. Economists had expected initial claims to drop to 425k. Continuing claims also trended higher, rising to 3.311 million for the week ending July 26.

"These data look alarming but they have been lifted by people claiming for extended benefits but proving eligible to make new claims," said Ian Shepherdson, chief U.S. economist from HFE. "The labor market is weak, no doubt about that, but just how weak it is right now is anyone's guess."

U.S. pending home sales rebounded by 5.3% in June, according to the National Association of Realtors (NAR), against expectations that the index would fall by 1.0%. The bounce is better than the most optimistic forecasts and follows a downwardly revised 4.9% drop in the prior month. This is the second unexpected bounce in the past three months. April's index rebounded 7.1% after the seven-year index hit an all-time low in March.

The consensus was expecting the PHSI to fall by 1.0% in the month, with estimates ranging from -3.0% to +3.5%. The PHSI now stands at 89.0, up from 84.5 in the previous month. From a year prior, the index has declined by 12.1%, compared with the previous month's 15.7% annual decline.

"The stabilization in sales seems rather cosmetic though, driven by bargain hunters picking up foreclosed homes," said Dimitry Fleming from ING.

U.S. consumer debt increased by $14.3 billion in June, according to data released Thursday from the U.S. Federal Reserve, which also showed that total consumer credit had risen to $2.586 trillion from the prior month's $2.572 trillion. As a percentage, consumer credit rose at an annual rate of 6.75%.

Comparable U.S. chain store sales rose 2.6% year-over-year in July, following a revised 4.2% increase in June, according to a report released by the International Council of Shopping Centers on Thursday. Total sales rose by an annual 7.5%, slower than the previous month's 8.7% gain.

According to the RBC Consumer Attitudes and Spending by Household (CASH) index, consumers are feeling a lot better about their financial circumstances these days, as lower oil prices and a rebounding stock market have stalled a downward spiral in U.S. consumer confidence. According to the index, overall consumer confidence grew in at 33.8 in August, a 19.2 point increase from last month's 14.6 reading.

Underground natural gas storage in the United States increased 56 billion cubic feet in the week ending Aug 1, the Energy Information Administration (EIA) said Thursday. The weekly increase was below the +62 Bcf Bloomberg estimate. In the previous week, the EIA reported a supply increase of 65 Bcf.

Citigroup Inc. agreed on Thursday to buy back roughly $7 billion worth of auction-rate securities that it sold to customers, in addition to about $100 million in penalties it must pay to settle charges of misrepresentations in its marketing of those securities. The announcement was made by the Securities and Exchange Commission and New York State officials.

In Canada, the value of building permits issued by municipalities dropped sharply in June, falling 5.3% from the previous month to $6.3 billion, Statistics Canada reported. The decrease was significantly larger than the 1.0% decline expected by analysts and reflected weakness in both the residential and non-residential sectors.

Housing permits fell 4.4% from May to $3.6 billion and non-residential permits were down 6.6% at $2.8 billion. Multi-family housing permits dragged down the residential totals for June, plunging 13.8% to $1.3 billion, while single-family permits staged a small rally, increasing 1.8% to $2.3 billion.

The Conference Board of Canada released a survey showing that higher costs and slowing markets have sapped the confidence from Canadian business leaders. Many of those surveyed expect economic conditions to remain tough for the rest of the year, the survey showed. More than 30% of respondents said they are concerned about weak market demand.

Canadians are flocking to snatch up property in the U.S. as a result of affordable house prices and attractive exchange rates, the National Association of Realtors said in its 2008 Profile of International Home Buying Activity survey. Since May 2007, NAR estimates that between 150,000 and 190,000 homes in the U.S. were bought by foreign nationals. This year, Canada replaced Mexico as the country with the largest share of foreign buyers in the U.S., with the percentage of Canadian buyers doubling to 23.5% from 11% last year, NAR said.

Earlier in the morning, the European Central Bank announced that it would keep its main refinancing rate unchanged at 4.25%, as expected. The ECB also reported that the marginal lending rate and deposit rate will remain at 5.25% and 3.25% respectively.

Following the rate decision, ECB President Jean-Claude Trichet warned that inflation will remain at elevated levels for a protracted period of time. Trichet also said labour costs had been growing over the past quarters and that the central bank would be monitoring wage negotiations "with particular attention." In a question and answer session, Trichet reiterated that the ECB never pre-commits and that the ECB has no bias regarding rates.

"The ECB is in a 'wait and see' position, to assess new information regarding the outlook for inflation and economic growth," said Jürgen Michels, an analyst from Citigroup. "In toughening the language regarding indirect effects of the rise in food and energy prices, the ECB remains a hawkish tilt."

Soaring inflation and weakening growth threatening to push the economy into recession were insufficient to sway the Bank of England from its monetary policy stance on Thursday as the bank held the benchmark 5.00% interest rate unchanged.

In overnight news, the German Economic Ministry reported that German industrial production rose 1.7% in June on an annualized basis, up from both the 1.5% gain expected and the 0.8% increase seen in May.

Seasonally adjusted labour force figures released by the Australian Bureau of Statistics (ABS) indicate that employment in Australia increased by 10,900 to 10,721,500 in July. The unemployment rate for the nation remained steady at 4.3%.

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 , Adam Button, abutton@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 , Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, ssussman@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

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