3 Numbers: French Industrial Strength, UK Production, U.S. Mortgages
James Picerno | Jun 10, 2015 01:54AM ET
Industrial production is the main event for economic news today, including releases for France and Britain. Later, the US housing sector is in focus with an update on demand via the weekly figures on mortgage applications.
France: Industrial Production (06:45 GMT): Europe’s No. 2 economy is on track to grow 0.3% in this year’s second quarter, based on noted last week.
Today’s monthly report on industrial output for April will provide a new perspective on France’s nascent recovery. The general outlook is upbeat. The pace isn't particularly impressive, but if accurate, the sight of another instalment of positive numbers will add hard data to the recent run of encouraging sentiment figures.
Industrial output is expected to rise 0.3% in April vs. the previous month, according to Econoday.com’s consensus forecast. That’s a welcome change from March’s mild 0.3% slump. For the annual comparison, production’s rise is projected to ease to 1.0% vs. 1.3% in the previous annual change.
Nonetheless, another year-on-year rise for industrial activity will mark the fourth straight month of improvement. The rebound is still modest at best, but the fact that it’s ongoing is the crucial factor at this point.
UK: Industrial Production (08:30 GMT): Is Britain’s economy decelerating? A few months ago even asking the question might have been perceived as beyond-the-pale thinking. The UK’s macro trend, after all, was widely hailed as a growth leader among developed nations. But the Confederation of British Industry (CBI) this week advised Rob Dobson last week. “Manufacturing looks on course to act as a minor drag on the economy, as the sector is hit by a combination of the strong pound and weak business investment spending.”
Today’s monthly release on industrial activity will be widely read as the market looks for more perspective on the debate about the state of Britain’s economy. Recent history shows that growth has decelerated, with industrial activity posting its slowest year-on-year gain in February and March in nearly two years. A number of analysts are expecting another round of lesser growth. If so, CBI’s warning will continue to resonate.
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US: Weekly Mortgage Applications (11:00 GMT): The housing sector’s delivered a mixed bag of numbers in recent months, but some analysts are looking for a stronger period of growth after a rough winter.
Recent numbers provide a degree of support for thinking positively, including existing home sales, which are ahead by more than 6% for the year through April. That’s below March’s nearly 11% rise, but April’s gain otherwise marks the strongest year-on-year rise since late-2013. Housing starts are looking stronger, too, with new construction jumping more than 9% in annual terms through April – the best pace in three months.
Why, then, don’t we see confirmation in the weekly numbers for mortgage applications, which measures demand for new financing of housing purchases? Demand tumbled 7.6% in the last week of May, according to the Mortgage Bankers Association (MBA). Some of the weakness is related to the Memorial Day holiday for that week. On the other hand, the number of weekly applications has been sliding for more than a month.
Industry trade publication Mortgage News Daily last week noted that “the drop in mortgage applications came despite lower contract and effective interest rates for each of the product types tracked by MBA."
Perhaps there’s nothing more troubling here than a delayed reaction, in which case new applications are poised to rebound and follow the stronger trend in starts and sales of late. Maybe, although another weekly decline in today’s release isn’t going to make the bulls’ case for housing any easier.
Disclosure: Originally published at Saxo Bank TradingFloor.com
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