Daily Economic Outlook December 19
From Shayne Heffernan
US Real Estate Data is Encouraging
The National Association of Home Builders reported Tuesday that its index of U.S. builder sentiment improved in December, reaching its highest level in more than six years. November housing starts, which the government will announce today, will provide more insight into the market. Economics consulting firm IHS Global Insight predicts a decline from October, but it says that’s largely due to a monthly drop in the volatile multifamily sector.
Overall, home builders are benefiting from the same improving conditions that are helping the existing home market.
Job growth helped drive the unemployment rate down to 7.7% in November from its peak of 10% in the fall of 2010. That’s fueling more housing demand as more people can afford to form households.
Improving sales and fewer foreclosures have thinned once-bloated supplies of homes for sale. That, too, is driving demand for construction.
Based on October’s selling pace, the nation’s supply of new homes for sale was 4.8 months, down from 12 months three years ago. Existing homes for sale were at a 5.4-month supply in October, down 22% from a year ago, says the National Association of Realtors.
U.S.: Agreement on a new budget to avert automatic spending cuts and tax rises in sight .
U.S. Obama proposed a plan to cut about $1.2 trillion in spending over a decade and raise a similar amount in taxes,
US : House Speaker John Boehner said he will push a measure that would include tax rises on income of more than $1 million..
GOLD Holdings in ETP increased to a record 2,631.43 metric tons yesterday
GOLD up 7.1 % this year, heading for a 12th annual gain,
JAPAN : Yen at April 2011 low :country’s trade deficit widened in November.
EURO-ZONE Greek Rating lifted from selective default to B- with a stable outlook, S&P
From Lloyds Bank
The Bank of England will release the MPC minutes from December’s meeting. The MPC left policy unchanged this month and the substance of the discussions was likely to have been similar to the previous month’s. Accordingly, eight members are likely to have remained content with the status quo, but we suspect Miles will have continued to call for a £25bn QE boost.
However, we will watch for any reaction to the latest weakness in services’ surveys and official industrial figures. Both can credibly be argued temporary, but may have unnerved certain MPC members. With APF flows not affecting gilt sales until April and the FSA reviewing bank capital ratios over coming months, the economy is likely to need to post signs of firmer activity to dissuade the Committee from providing more QE early next year.
We are forecasting a continuing improvement in US housing activity for November. Housing starts are expected to rise to an annualised rate of 900k, from 894k in October. If realised this would be the strongest rate since mid-2008. Similarly we look for building permits to rise to 880k following a 2.7% fall in October.
Yesterday’s NAHB housing market index showed that homebuilders’ confidence rose to its highest level since April 2006. Coupled with a solid increase in sales in October, which pushed the months’ supply to a post recession low of 5.4, we expect the positive trend in housing data to translate into further gains in activity over the coming months. This poses an upside risk for construction and related employment in 2013.
Meanwhile, the German Ifo business climate index is expected to register a modest improvement in sentiment rising from 101.4 in November to 102.5 in December.
Heffernan Capital Management
Business Development Director – Private Client Group,
3 Raffles Place #07-01
Bharat Building Singapore 048617
Tel: +65 6329 6408
Fax: +65 6329 9699
Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals. He is also an active consultant working with Corporations around the World.
He is recognized as one of the leading Economists in South East Asia, as well as the preeminent authority on ASEAN. His opinions and forecasts are widely read by decision makers in the region and Internationally.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.
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