Pending home sales felt the sting of high mortgage rates last week in the US, declining by 1.3% despite hopes of a 0.2% rise. Potential buyers are feeling intimidated by the prospect of being tied down to higher monthly payments, with many calling a halt to their buying plans. Another unexpected plunge in US data were the core durable goods orders which plummeted by 0.6%; the exact opposite figure than the predicted 0.6% rise. While such figures can be regarded as a gloomy portrait of the US economy, they can never be taken as a mirror reflection of what is going on; the CB Consumer Confidence for August rose to 81.5, exceeding expectations for a figure of 79.6, revealing that sentiment for the current economic situation is overall positive. On the same wave of optimism were the Jobless Claims released on August 29th, which witnessed a significant drop, declining from 336K to 331K in line with expectations. Further boosting morale was the US Preliminary GDP which rose above expectations of 2.3% and hit 2.5%. Of fundamental importance this week will be the Non-Farm Employment Change which is to be released on September 6th and is forecast at 181K, while the unemployment rate is predicted to remain unchanged at 7.4%
Marking the end of summer in Europe was a cloud of mixed data from the region's strongest economy, Germany. Whilst the German Ifo Business Climate saw a higher than expected increase to 107.5, German unemployment change rose to 7K; the figure was not only disappointing but almost alarmingly above expectations of a 5K drop. All eyes will be on the ECB Press Conference on September 5th, where President Mario Draghi is predicted to keep interest rates exactly where they are – at record lows.
Things are looking up again for the Japanese economy as the country's recovery is being driven further by a 0.7% increase in the national CPI in July. The positive figure is slightly above expectations of a 0.6% increase and marks the second consecutive monthly rise. Economists are optimistic that this is the beginning of the end of years of crippling deflation for Japan. In store for the country this week is the Monetary Policy Statement on September 5th, where the Bank of Japan is predicted to stay firm in the implementation of its aggressive stimulus policy.
In the United Kingdom, Bank of England Governor Mark Carney delivered a speech in Nottingham on August 28th where he reassured the country that interest rates are to remain low for a minimum of three years. H also addressed the topic of stimulus and said that the central bank will not hesitate to add further stimulus if the economy needs it, but the overall picture right now is that the UK economy seems to be recovering very well. September 2nd saw the release of the UK Manufacturing PMI, which soared to 57.2, rising for a fifth consecutive month and hitting an 18 month high. Other market data pending this week in the UK include the Construction PMI which is due on September 3rd and predicted to rise to 58.4, and the Manufacturing Production due on September 6th and estimated at 0.4%.
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