Friday, 1 December 2006

Higher US consumer spending, solid European growth and surging Indian economy

Income and spending in the US rose in October. From Bloomberg:

Americans earned 0.4 percent more than in September, the Commerce Department said today in Washington, and purchases climbed 0.2 percent after declining the prior month...

Adjusted for inflation, spending increased by the most in three months... Optimism about the resilience of consumers was partly offset by figures from the International Council of Shopping Centers showing retailers' November sales rose less than analysts estimated.

Other data yesterday were mostly negative.

The number of workers filing first-time applications for jobless benefits jumped by 34,000 to 357,000. The National Association of Purchasing Management-Chicago said its index fell to 49.9 this month, the lowest since April 2003, from 53.5 in October...

Home prices rose an average of 0.86 percent during the third quarter, the smallest gain since 0.79 percent in the second quarter of 1998, the Office of Federal Housing Enterprise said today in Washington.

And core inflation is matching the consumer's resilience.

A gauge of inflation watched by the Fed, the personal consumption expenditure core deflator index, rose 0.2 percent in October for a second month... It was up 2.4 percent from a year ago, matching the increase in September.

Inflation has been relatively low in Europe, but interest rates there are likely to head higher nevertheless, especially after yesterday's reports, summarised by Reuters.

A tumble in unemployment in Germany headed mostly positive news from the euro zone economy on Thursday and forecasts of further healthy growth in early 2007 set the stage for a December interest rate rise.

Germany's unadjusted jobless rate dropped below 4 million for the first time in four years...

The EU statistics office said third-quarter economic growth was 0.5 percent in the 12-nation zone. This was slower than in the first half of 2006 and a touch lower than U.S. growth, but remained solid, according to economists.

The European Commission raised its growth forecast for the first three months of 2007 to a range of 0.3-0.8 percent from 0.0-0.5 percent. It predicted second quarter growth of 0.3 to 0.9 percent.

... [T]he European Commission estimate[d] that inflation accelerated in November as the impact of sliding oil prices lessened. The rate hit 1.8 percent, up from 1.6 in October.

However, consumer confidence in Europe is looking a little shaky, falling in November in France and in the UK. Retail sales were also reportedly down in Germany in October and in the UK in November.

The weak consumer sentiment in the UK contrasts with house prices that refuse to cool, rising another 1.4 percent in November, according to Nationwide.

Indeed, overall economic sentiment in Europe remains strong while the business climate indicator for the euro area hit an all-time high in November.

But in any case, the growth rates in both the European and US economies are not going to match India's. From AFP/CNA:

India's economy grew a faster-than-expected 9.2 percent in the second quarter to September, official data shows, prompting concerns that overheating will require higher interest rates...

The gains were led by services, including real estate and communications, which grew 13.9 percent, followed by manufacturing at 11.9 percent year-on-year.

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