Saturday, October 1, 2022

New Home Sales, Durable Goods Orders Show Strength


by Adam Button

The lagged again Wednesday despite a risk-averse tone while the led the way. A wave of US economic data ahead of the holiday highlighted several continuing trends, which we explore in today’s note. The chart below raises doubts over gold’s direction in absolute and relative terms.

Gold-SPX Weekly Chart

1) Housing boom

The boom in housing isn’t a uniquely American phenomenon but it’s heating up quickly there. New home sales in October rose 999K compared to 975K expected. The prior was also revised higher and sales are up

This is a secular trend but also highlights the greatest power of all in financial markets:

2) Trade

One of Donald Trump’s most powerful promises was to improve US trade but the October report showed that even Presidents can’t break the rules of economics. There was an $80.2B deficit, which was nearly in-line with estimates but the larger picture is a declining trend from roughly $65B monthly deficits when he took office. That steady flow of money out of the US is a powerful force and a long-term dollar drag.

3) The power of government spending

The US, UK and Canada are the three biggest spenders during the pandemic with outlays of 14-18% of GDP. That spending kept a human tragedy from turning into an economic one but in the US at least, the money is beginning to dry up. Wednesday’s report showed income dropping a surprise 0.7% versus +0.4% expected. On the flip side, there’s renewed talk of US student loan forgiveness.

4) Manufacturing strength

We’re still in the dark about the underlying strength of the manufacturing sector. We recently got two Fed reports that showed some softening but core manufacturing orders and shipments in the October report were strong. One of the big surprises of the pandemic has been how well that sector has held up but whether it continues is an equally big question mark.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source link


Please enter your comment!
Please enter your name here



Related Stories