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Good morning. Jeff Sparshott here with the latest on the housing market, the global slowdown, a warning from the ECB’s new chief, auto tariffs and industrial metals. You can send us any questions or comments by replying to this email.
Locked Out
Sales of higher-priced homes picked up last month. But the market for starter homes and others aimed at lower- and middle-income buyers was slowed by a lack of inventory and rising prices, Will Parker and Amara Omeokwe report.
- U.S. existing-home sales increased 4.6% from a year earlier, marking the fourth straight year-over-year gain. Homes in the $500,000 to $750,000 range experienced the strongest improvement, while sales of homes priced below $250,000 declined.
- Less than a third of sales in October involved first-time buyers. “Existing home owners are all selling to each other and are leaving the first-time home buyers out in the cold. That’s why we can see more home sales even though inventory went down,” said First American Financial Corp. economist Mark Fleming.
- Despite the market imbalance, the latest figures add to evidence that housing will contribute to overall economic growth for the second straight quarter, reversing a year-and-a-half long drag.
WHAT TO WATCH TODAY
IHS Markit’s preliminary U.S. manufacturing index for November is expected to tick up to 51.4 from 51.3 at the end of October. (9:45 a.m. ET)
The University of Michigan consumer sentiment survey for November is expected to tick down to 95.5 from a preliminary reading of 95.7. (10 a.m. ET)
The Kansas City Fed’s manufacturing survey for November is expected to rise to minus-2 from minus-3 the prior month. (11 a.m. ET)
The Baker Hughes rig count is out at 1 p.m. ET.
TOP STORIES
Eurozone Nears Stall Speed
Europe’s manufacturing malaise is seeping into other sectors of the economy. IHS Markit’s purchasing managers index for the service sector fell to a 10-month low in November. While factory activity appears to be stabilizing the sector remains mired in its worst contraction in six years. “Tentative signs of life in the core eurozone countries of France and Germany are welcome news, as is an easing in the manufacturing downturn, but a fresh concern is that the rest of the region has slipped into decline for the first time since 2013,” said IHS Markit economist Chris Williamson. Taken together, the measures suggest the region’s economy is close to stagnation as the year ends.
Japan’s numbers weren’t any better, though this month’s figures may have been skewed by the lingering effects of a recent sales tax hike and a typhoon that severely damaged parts of the country. “However, we can now deduce from the November PMI data that there is a strong possibility of Japan’s economy contracting in the fourth quarter,” IHS Markit economist Joe Hayes said.
Meanwhile, in America…
IHS Markit’s U.S. report is due out this morning. But there are already signs the economy has lost momentum. The Conference Board’s leading economic index for October fell for the third month in a row. The LEI forecasts economic activity by tracking 10 leading indicators including manufacturing hours, building permits, consumer expectations and credit conditions. It hasn’t fallen three months in a row since 2015-2016. Back then, the economy was also mired in a soft patch—gross domestic product advanced at a scant 0.1% pace in the fourth quarter of 2015—but of course bounced back. 2019 doesn’t look so bad by comparison. “The LEI suggests that the economy will end the year on a weak note, at just below 2% growth,” said Conference Board research director Ataman Ozyildirim.
WARNING
Christine Lagarde has taken notice of the slowing global economy. In her first speech as head of the European Central Bank, she warned that a “fracturing” of the global economic system means that robust rates of economic growth “are no longer an absolute certainty,” Paul Hannon reports.
“Ongoing trade tensions and geopolitical uncertainties are contributing to a slowdown in world trade growth, which has more than halved since last year,” she said Friday. “This has in turn depressed global growth to its lowest level since the great financial crisis.”
Drive Me Crazy
President Trump’s decision to let a deadline to impose tariffs on foreign auto imports lapse has left the auto industry puzzled over the White House’s next move. The president had until Nov. 13 to decide whether to apply the tariffs but the White House hasn’t announced a decision, Josh Zumbrun, Ben Foldy and Emre Peker report.
- Experts on trade law say Mr. Trump might still seek to impose the tariffs despite the missed deadline, but such an action would be vulnerable to a strong legal challenge for not complying with Section 232 of the Trade Expansion Act of 1962.
- Alternatively, Mr. Trump could decide to pursue tariffs under Section 301 of the Trade Act of 1974, the same mechanism the president used to impose tariffs on China.
- Several people in the auto industry said they considered a Section 301 action to be a genuine threat. But without any clear signals from the White House, industry executives acknowledge it is a guessing game.
That’s so Metal
Falling prices of industrial metals such as copper and aluminum signal that some investors remain wary of setbacks to a U.S.-China trade deal, countering the optimism that has kept stocks just below Monday’s records. Since hitting a 3 ½-month high on Nov. 7, copper prices have fallen 3.8%, while aluminum is down 4.4%. Other base metals critical to manufacturing and construction such as nickel and lead are also falling, underscoring worries that a weaker global economy will result in lower demand for industrial commodities, Amrith Ramkumar reports.
China Gooses its GDP
China raised its estimate for last year’s gross domestic product by 2.1%, putting the size of the world’s second-largest economy at 91.928 trillion yuan ($13.078 trillion). That’s one of the smaller revisions in recent years: China’s GDP was raised by 16.8%, 4.4% and 3.4% following the previous three national economic censuses. China’s official goal is to double GDP from 2010 to 2020. “Despite [the National Bureau of Statistics] stressing that the current round of revisions is the result of the census uncovering previously unrecorded activity, it’s hard to ignore the fact that it will also help them meet official growth targets,” said Capital Economics economist Julian Evans-Pritchard.
WHAT ELSE WE’RE READING
Even the world’s richest countries can struggle to measure their own economies. “On Nov. 7, Danish statisticians revised growth estimates for the past three years, the latest in a series of reassessments that cumulatively added 93 billion kroner ($13.7 billion) in previously ‘unaccounted for’ gross domestic product. Meanwhile, the Riksbank lashed out last week at Sweden’s number-crunchers for what it described as a ‘catastrophic’ overestimation of unemployment. Such frustration might seem reminiscent of the problems of poor visibility faced by policy makers in less developed countries, where data collection might be closer to guesswork. But both episodes also illustrate that—despite high expectations placed on statisticians—gauging an economy’s size, health and workforce in the age of globalization and the internet is no easy task,” Nick Rigillo and Catherine Bosley report at Bloomberg.
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