US 3Q GDP Up 4.9%: Trade & Inventories Boosted Revision, Profits Fell

New single family home sales rose a modest 1.7% last month to 728,00 but the prior month's figures were revised down to the point where so far this year, new home sales are down by nearly one third. Sales during the latest three months were 45.3% below the peak hit in the middle of 2005.

In the West, sales fell 15.7% last month to a new low and reversed all of a downwardly revised gain in September. Sales out West are down by more than one third this year and they are down by two thirds from the 2005 peak. Sales in the Northeast ticked up 1.8% and they have moved erratically sideways this year. Sales in the Midwest posted a 14.2 m/m gain but are off by one third since year end 2006. Sales in the South also rose 6.8% m/m but are down one quarter this year.

All this weakness in sales has done nothing for prices and they fell another 8.6% last month. The decline left prices down 17.1% from the peak earlier this year.

The number of homes for sale continued down another 2.3% last month and the supply of homes is off a moderate 3.6% this year. However, at the current low sales rate, the months' supply of homes on the market is 8.5, down slightly from September but still double the rate for all of 2005.

Initial claims for unemployment insurance surged much more than expectations to the highest level since early this year. The 23,000 rise last week to 352,000 followed a little revised 12,000 decline during the week prior. The early timing of this year's Thanksgiving holiday may have affected the latest figure.

A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last six years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.

The four week moving average of initial claims rose to 335,250 (3.3% y/y) and that was up 3.5% from the prior four weeks.

The largest increases in initial claims for the week ending Nov. 17 were in Texas (+1,097), Kentucky (+797), Idaho (+341), Arkansas (+219), and Wisconsin (+209), while the largest decreases were in Michigan (-6,493), California (-5,905), Puerto Rico (-3,882), New Jersey (-3,011), and Virginia (-1,542).

Continuing claims for unemployment insurance surged 112,000 from the prior week, the largest one week increase since early this year, and it followed modest decline in the prior three weeks.

The continuing claims numbers lag the initial claims figures by one week.

The insured rate of unemployment rose slightly to 2.0% from 1.9% during the prior week.

According to the Office of Federal Housing Enterprise Oversight (OFHEO), home prices in the U.S. fell last quarter and that was the first q/q decline since 1994. The decline pulled the y/y change in prices to a still positive 1.7% but that overall rate of appreciation is down from the double digit rates of gain during 2004 and 2005.

The House Price Indices in this report are weighted indexes based on repeat sales or refinancings using data provided by Fannie Mae or Freddie Mac. The overall figures are available in Haver's USECON data base and the state figures are in USREGIONAL

Price declines were scattered throughout the country. Job cutbacks in the auto industry helped lower prices in Michigan for the sixth consecutive quarter and in New York prices fell 0.5%. Prices in Florida fell for only the second quarter but the y/y rate of gain of 1.3% compares to staggering rates of growth in earlier years. Prices also fell in Massachusetts for the fourth quarter in the last five (-1.0% y/y) and prices in Nevada fell 1.6% (-1.5% y/y).

The latest report from the Office of Federal Housing Enterprise Oversight (OFHEO) can be found here.

Defining and Detecting Predatory Lending from the Federal Reserve Bank of New York is available here.

The abrupt drop in French consumer confidence in the INSEE survey is sharp and as strong a reversal as appeared in early 2001. Confidence itself at -28 in the 11 percentile of that variable’s range – very weak showing. Living standards over the past 12 months as well as those expected in the next twelve months rank in the bottom eight percent of the range for such responses historically. Expected unemployment in the next 12 months is barely below the mid point of its historic range at a level of 13.

Price developments over the past 12 months have given the second highest reading ever (since January 1990). Expected price developments in the 12 months ahead are still elevated in the 57th percentile of their range.

Oddly the ‘favorable to save’ response ranks above its midpoint at the sixty-first percentile. But ‘the ability to save’ ranks in the bottom third of its range.

The financial situation is assessed as being in its 57th percentile at a reading of +15, a slippage from October’s 16. But the past 12 months are assessed as having been in the 40th percentile of their range; what’s worse is that the next 12 months are assessed as being in the bottom third of theirs.

The French consumer has shed all the post election visions of nirvana and Sarkozy’s honeymoon is over. The strong euro, ongoing budget fights, and racial unrest in Paris’ suburbs are taking their toll despite the spirit of optimism that swept him into office and lingered…for a while.

Japan continued to see its textile business eaten alive by international competition in October. Still, manufacturing output rose by 1.6% month-to-month and stands higher year/year by 3.5% after rising 6.6% the year before.

Consumer goods and intermediate goods continue to show solid gains. Investment goods output is off by 1.7% year/year and is off at a 4.3% annual rate over three months.

On the whole, Japan’s industrial sector is doing well, living off exports while domestic demand is still trying to find its way.

The UK retail sector is stuck more or less mid range. Various components are generally at or above the mid point of their respective ranges. Orders, the relative strongest component, resides in the 70^th percentile of its range. Sales are in the 52^nd percentile. Sales for the time of year are in the 44^th percentile. The stock-to-sales ratio is a touch high in the 60^th percentile of its range. The various expected sales and orders are generally in the same relative positions. See the table below. The chart on the left shows that while variables remain mid range there has been some slippage recently in the trend for sales, while orders trends have held a bit firmer.