Thursday, 24 November 2011

US income and consumer sentiment up but other economic data weak

US personal income rose 0.4 percent in October, the biggest increase since March, according to a Commerce Department report released on Wednesday. With the personal consumption expenditure price index dipping 0.1 percent, real disposable income increased 0.3 percent in October, the largest gain since May 2010.

Personal consumption expenditure slowed though, rising just 0.1 percent.

Another report on Wednesday showed that US consumer sentiment continued its recovery in November though. The Thomson Reuters/University of Michigan consumer sentiment index rose to 64.1 this month from 60.9 in October.

However, US durable goods orders fell 0.7 percent in October, with orders for commercial aircraft plunging 16.4 percent. Excluding transportation, orders rose 0.7 percent. Orders for capital goods excluding defense and transportation fell 1.8 percent.

Manufacturing also appears to have slowed in China. An earlier report on Wednesday showed that HSBC's China purchasing managers' index dropped to 48.0 in November, the lowest since March 2009, from 51.0 in October.

The situation looks worse in the euro area, where industrial orders fell 6.4 percent in September, the biggest decline since December 2008.

There appears to have been little improvement since. The eurozone manufacturing PMI fell to 46.4 in November from 47.1 in October. A rebound in the services PMI to 47.8 from 46.4, however, helped the composite PMI rise to 47.2 in November from a 28-month low of 46.5 in October.

Prospects for improvement in the eurozone economy appear to be receding with signs on Wednesday that contagion in the debt crisis may now be starting to threaten even Germany. From Reuters:

The German debt agency could not find buyers for almost half a bond sale of 6 billion euros. That pushed the cost of borrowing over 10 years for the bloc's paymaster above those for the United States for the first time since October.

"It is a complete and utter disaster," said Marc Ostwald, strategist at Monument Securities in London.

Disaster or not, the new securities were sold at a yield of 1.98 percent, down from 2.09 percent in October.

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