Wednesday, 21 December 2005

Housing in good shape in US and UK; China GDP revised up, may slow in 2006

Rising housing starts and low inflation -- in other words, more good news for the US economy. Reuters reports:

U.S. housing starts rose 5.3 percent in November, defying Wall Street expectations for a slowdown...

The Commerce Department said November housing starts rose to a 2.123 million unit annual rate... October starts were revised up to a 2.017 million unit annual pace from the originally reported 2.014 million unit rate...

Permits for future construction, an indicator of builders' confidence, shot up 2.5 percent to a 2.155 million unit pace...

U.S. producer prices fell a larger-than-expected 0.7 percent last month, the biggest drop in 2-1/2 years, according to a Labor Department report.

The drop in the producer price index, a gauge of prices received by farms, factories and refineries, was the largest since April 2003 and reflected a 4 percent drop in energy costs, which swamped a 0.5 percent gain in food prices, the department said.

The core PPI, which strips out those volatile costs to provide a better gauge of underlying inflation pressures, edged up just 0.1 percent.

No wonder consumer sentiment is improving.

ABC News and the Washington Post said their Consumer Comfort Index rose to -11 in the week ending December 18 from -13 the prior week.

The strong US housing market may be defying analysts' expectations, but the UK housing market is not doing too badly either. From another Reuters report:

Mortgage lending posted its biggest rise in more than a year in November, the British Bankers' Association said on Tuesday, in a further sign that the housing market is picking up.

The improvement echoed a report overnight from the Royal Institution of Chartered Surveyors showing house prices rose for the first time since July 2004 in the three months to November, with surveyors optimistic about further gains.

BBA said the 5.1 billion pounds increase in underlying mortgage lending was the highest since July 2004. The increase was well above growth of 4.3 billion pounds in October and the average 4.4 billion pounds over the last 6 months.

Meanwhile, China's upward revision of its GDP made headlines in the mainstream media, even though nobody seems surprised by it.

A new economic census found output in China's service sector had been under-reported by some 262 billion dollars, largely due to the way the government compiled statistics, Li Deshui, commissioner of the National Bureau of Statistics, told reporters.

"Preliminary estimation using results from the economic census indicates that China's GDP for the year 2004 was 15,987.8 billion yuan (1.98 trillion dollars) at current prices," Li said.

This represents "an increase of 2,300 billion yuan (284 billion dollars) or 16.8 percent over the preliminary estimated figure using regular annual statistical data."

In its latest Asia Economic Monitor, the Asian Development Bank expects China's growth rate to slow in 2006, but not for other East Asian economies.

Although several components of the external environment are likely to remain more or less unchanged in 2006, a turnaround in global IT demand, a recovery in Japan’s domestic demand, and continued strong, but slower, growth in the PRC bode well for the region’s economic prospects.

Thus, despite the much-anticipated economic slowdown in the PRC, emerging East Asia’s average GDP growth in 2006 is forecast to be 7.2%, broadly the same as the likely outturn in 2005.

Performance in 2006 is expected to vary significantly across countries. In the PRC, growth is projected to ease to a shade below 9%, but it is expected to strengthen in most other major economies.

Excluding the PRC, countries in emerging East Asia are forecast to grow by 5.3% next year, higher than the estimated 4.6% figure for this year.

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