GEW August 27, 2009

GER: The GfK Consumer Confidence Index rose to forecast a value of 3.7 in September from 3.4 in August, a tad higher than market expectations of a 3.6 print. The economic expectations index rose to -7.5 in August from -14.0 in July, the fifth straight month of increase in the index. The income expectations index surged seven points to 8.8 in August, the second consecutive month of increase and a little over 25 points higher than the level in July last year. The propensity to buy index rose further than July, by six points to 31.1 in August, its highest since December 2006.

UK: The Nationwide House Price Index rose 1.6%mom in August, the fourth straight month of rise and the fastest pace in over two-and-a-half years to push the average price of a home to GBP160.2k. Over the year, house prices were lower by 2.7% after having been lower by 6.2%yoy in July. In the three months to August, house prices rose 3.3% compared with a gain of 2.7% in the preceding three months, the most since February 2007.

USA: The second estimate of Real GDP revealed that economic activity contracted 1.0% s.a.a.r in Q2 2009, that after a 6.4% fall in the first quarter. While the advanced estimate had also shown a similar contraction in economic output, today’s data came in better than expectations of a 1.5% contraction. Personal Consumption Expenditure was lower by 1.0%qoq as spending on durable goods dropped 5.8% in Q2, but was still better than expectations of a fall of 1.3% over the quarter. PCE, however, detracted 0.7ppts from second quarter GDP growth. Private investments continue to remain dismal, down 24.4% over the second quarter, as residential investments came in lower by nearly 23%qoq (22.8%qoq) while fixed investments fell 13.5% over the quarter, nearly a third of the fall seen in the previous quarter. Investments of equipment and software dropped 8.4%qoq, a much slower pace of declone compared with a 36.4% fall in the previous quarter. In terms of contribution to economic output, private investments detracted 3.2ppts while fixed investments took away 1.8ppts. Government Spending led most of the economic revival for the second quarter, as it surged 6.4%qoq, with Federal Government expenditure up 11.0% over the quarter from 4.3% in the first quarter. Defense expenditure led the surge in overall Government spending with a 13.3% rise over Q2. Government spending contributed nearly 1.3ppts to economic growth in the second quarter. Exports fell 5.0%qoq in Q2, a marked improvement over the near 30.0% fall in the previous quarter, while imports dropped 15.1%qoq, a far slower pace of fall compared with the 36.4% decline in Q1 2009. Corporate profits rose 5.7% over the quarter in Q2, the biggest increase since Q1 2005 and excluding inventories, economic output grew 0.4%qoq in Q2 after having contracted 4.1% over the previous quarter, the biggest jump in growth in a year.