US and UK housing markets steady, German producer price inflation rises

The US housing market may be cooling, but it is not quite collapsing yet. From Reuters:

The pace of U.S. housing construction rose more than expected in May after three months of declines, but permits for future projects fell, a government report showed on Tuesday.

Economists said the data confirms a gradual slowing of the U.S. housing sector.

The Commerce Department said housing starts rose 5 percent in May to a 1.957 million unit annual pace from an upwardly revised 1.863 million unit rate in April.

However, permits for future groundbreaking, an indicator of builder confidence, fell 2.1 percent to a 1.932 million unit pace in May, the lowest since November 2003 and the first time since January that total housing permits fell below starts.

And the UK housing market remained firm in May, as Reuters reports.

Underlying mortgage lending rose by its biggest amount in just over two years in May, British Bankers' Association data showed on Tuesday, suggesting a property market revival this year remains intact.

Net mortgage lending rose 5.7 billion pounds, up sharply from a revised 5.1 billion in April and also well above the average 5.1 billion pound increase over the past six months. It was the biggest rise since April 2004...

The BBA also said underlying credit card lending fell by 300 million pounds, its second big drop in the past three months. Unsecured lending rose by 400 million pounds.

The Building Societies Association said in a separate release that mortgage approvals rose to a seasonally-adjusted 4.514 billion pounds in May from 4.473 billion in April.

And the Council of Mortgage Lenders said gross mortgage lending was 28.7 billion pounds in May, the highest monthly figure since July 2004's 28.9 billion.

However, broad money supply growth in May slowed to a 11.8 percent annual rate from 13.1 percent in April, according to the Bank of England. The growth rate in M4 lending fell to 12.4 percent from 12.7 percent in April.

Meanwhile, German producer prices rose at its fastest annual rate in 24 years in May. From Bloomberg:

Goods from plastics to newsprint were 6.2 percent more expensive in May than a year earlier, compared with 6.1 percent more in April, the Federal Statistics Office in Wiesbaden said today. That's the most since June 1982. From April, prices rose 0.1 percent...

Economists expected producer prices to gain...6.4 percent, according to the median of 34 forecasts in a Bloomberg News survey. Excluding energy, producer prices increased 0.4 percent from April and 2.3 percent from a year earlier.

However, Bloomberg's Matthew Lynn thinks that it is Spain's economy that we should be worried about.

For a decade, the Spanish have been riding a rising tide of cheap money, fuelling a construction, property and now a mergers and acquisitions boom. It can't be long before this tide turns. When it does, it is likely to be messy -- not just for Spain but for the whole of Europe as well...

In decades past, Spain might have been peripheral to the European economy. France, Germany and Italy were the countries that mattered. Not any more. According to Lombard Street calculations, between 2003 and 2005 39 percent of the growth in the euro-area economy came from Spain. Without it, the euro region would scarcely have expanded at all.

When Spain does turn down, much of the growth in the euro area is going to disappear at a stroke.