August 29, 2014

Italy Posts Biggest Consumer Price Decline on Record Amid Slump

• Inflation rate based on E.U. ▼0.2% YoY (forecast ▼0.1%) in August
• Prices ▼0.2% MoM, record low in almost ten years
• Mostly due to an increased YoY decline of energy costs and to a slowdown in the price of services
• Italy’s economy contracted in Q2
• Draghi indicated last week that he may boost stimulus amid concerns about falling inflation expectations which could impact actual inflation as investors, consumers and companies pull back spending in anticipation of even weaker prices 

U.S. Consumer Spending Falls for Firs Time in Six Months

• Household purchases unexpectedly ▼0.1% in July, the first drop in six months; compared with ▲0.4% in June
• Income rose at the slowest pace of the year and savings climbed to the highest level since end of 2012
• Incomes ▲0.2% in July (▲0.3% forecast)
• The saving rate ▲ to 5.7% in July, the highest since December 2012
• While an improving job market is lifting confidence, it has yet to spur the broad-based increases in pay that will boost demand at retailers
• Spending on durable goods, including cars and trucks, ▼0.6% after adjusting for inflation, after ▲0.5% in June
• Purchases of non-durable goods, which include fuel and clothing, ▼0.2%

Consumer Sentiment in U.S. Unexpectedly Increased in August

• The Thomson Reuters / U. of Michigan final sentiment index ▲ to 82.5 from 81.8 in July (forecast 79.2)
• Payroll gains at the strongest pace since 1999 and muted firings are keeping consumers upbeat about the economic outlook.
• Alongside the decline in layoffs, employers have added an average 230,000 workers to payrolls a month so far this year
• Wage gains have been slower to materialize

Thought

Along with the article above, "U.S. Consumer Spending Falls for Firs Time in Six Months," two contrary articles suggest that labor market is not fully efficient yet. It means that Fed. will take more time to observe labor market before it eases QE.

London Property Market Falters on Price Resistance

• London’s property market stagnated for a second month in August as buyers became reluctant to accept high asking prices amid the prospect of increasing borrowing costs
• “Talk of a housing bubble and warning from the Bank of England have impacted sentiment,” Richard Donnell, director of research at Hometrack said.
• In London, 11% of postcode districts registered price ▲ this month, down from 87% in February
• Hometrack said that the number of new buyers registering with estate agents ▼0.9% this month
• Along with prospect of interest-rate increase and weak wage growth, the market will be price sensitive.

Thought

Okay, there were few articles that London's property market is overpriced. Along with regulations and higher-interest-rate expectation, decline in property market is expected. BOE was worried that bubble in the real estate market would hurt the U.K. economy, which recently get back on full-recession track. However, decline in real estate market may hurt U.K.'s service industry, which takes about 79% of GDP.