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Eurozone Q3 GDP Forecasts: Last Update

Several indicators which can be used to update our forecasts concerning Q3 GDP were published this week:


1/ France’s merchandise trade deficit widened in September as imports grew at nearly twice the rate of exports, the Customs Bureau said Friday. Note that trade deficit was revised higher in August and July.


2/ France’s industrial production decreased for the third successive month in September. In the third quarter, manufacturing production dropped 1.1 percent quarter-on-quarter.

3/ Germany’s trade surplus widened in September to a record high in a development that underlines criticism that Europe’s largest economy is not importing enough to boost other economies in Europe.


4/ Germany’s federal statistical office said industrial production declined by a seasonally adjusted 0.9% in September.


5/ Italy Stats Agency confirmed that Itilian GDP contracted in Q3.


As a consequence, we can build our scenarios with a more cautious approach regarding French and Italian contributions. By taking into account the weight of each economy in the euro area (Germany: 27%; France: 21%; Italy: 18%; Spain: 12% and Belgium: 5%), we get the following forecasts:


Growth Forecasts
Scenario Pessimistic Central Optimistic
Germany 0.2% 0.3% 0.4%
France -0.1% 0.0% 0.1%
Italy -0.2% -0.1% 0.0%
Spain (1st publication) 0.1% 0.1% 0.1%
Belgium (1st publication) 0.3% 0.3% 0.3%
Others 0.0% 0.1% 0.2%


Growth Contributions
Scenario Pessimistic Central Optimistic
Germany 0.054% 0.081% 0.105%
France -0.021% 0.000% 0.021%
Italy -0.054% -0.036% -0.018%
Spain (1st publication) 0.012% 0.012% 0.012%
Belgium (1st publication) 0.015% 0.015% 0.015%
Others 0.000% 0.017% 0.034%
Total 0.006% 0.089% 0.169%
Total (rounded) 0.0% 0.1% 0.2%


In the central scenario, growth expectation was revised downward to 0.1% QoQ. It seems that situation will normalize in Q3 with weaker growth both in France and Germany, a smaller contraction in Italy and a rebound in Spain.

Pending Home Sales Should Be Weaker Than Expected in September

The NAR is scheduled to report September pending home sales on October 28th and the consensus is expecting no change from August:


Yet, according to my friend, Christophe Barraud, Chief Economist and Strategist at Market Securities and also the best forecaster of US statistics since November, pending home sales should decrease by 2.8% MoM in September:


Regarding this index which helps to forecast existing home sales, 30 to 45 days in advance, I anticipate a decline from August. According to my estimate, in order for the pending home sales in adjusted value to be stable from August to September, raw data should increase 8.6% YoY. Nevertheless, local data that I gathered show a rise of 5.5%. Indeed, even if pending home sales rose in some areas like in New York (18.6%), they fell in other places like in Arizona (-28.9%). After seasonal adjustment, pending home sales should decrease by 2.8% MoM.


This forecast is coherent with comments from Lawrence Yun and Gary Thomas:


Lawrence Yun, NAR chief economist, said a decline was expected. “Affordability has fallen to a five-year low as home price increases easily outpaced income growth,” he said. “Expected rising mortgage interest rates will further lower affordability in upcoming months. Next month we may see some delays associated with the government shutdown.”
NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said there are far-ranging consequences from the repeating stalemates in Washington. “Just one impact of the recent government shutdown – delays in tax transcripts needed for approval of mortgage loans – put a monkey wrench in the transaction process and could negatively impact sales closings in next month’s report,” he said.

US Existing Home Sales Should Be Slightly Below Expectations in September

The NAR is scheduled to report September existing home sales on Monday and the Bloomberg consensus is expecting 5.30 million units down 3.3% from August.


Yet, according to my friend, Christophe Barraud, Chief Economist and Strategist at Market Securities and also the best forecaster of US statistics since November 2012, existing home sales should fall significantly in September:


According to my estimate, in order for the sales in adjusted value to be stable from August to September, that is to stay at 5 480K – raw data should rise 17.5% from September 2012 to September 2013. Nevertheless, local data that I gathered show a rise of 12.6%. Indeed, even if existing home rose in some regions like in North Texas (22.4%), they fell in some areas like in Arizona (-6.6%) or Las Vegas (-1.2%). Finally, we get a seasonally adjusted statistics of 5 250 K which represents a 4.2% drop MoM.


This forecast is coherent with articles which show that, in several regions, sales YoY were far below the +17.5% threshold needed to stabilize sales in September:
- Albuquerque (+7.9% YoY)
- Twin Cities (+14.5% YoY)
- California (+5.9% YoY)

Analysts Expect August Vehicle Sales to Reach Almost the Same Level as in July

Automakers will release August vehicle sales next Wednesday (September 4th) and currently, analysts estimate August sales to reach almost the same level as in July (15.73 million seasonally adjusted and annualized).


Here are some forecasts from specialists:


1/ Edmunds: Retail Market Keeps Auto Industry at Full Speed in August, Forecasts, the premier resource for car shopping and automotive information, forecasts that 1,455,911 new cars and trucks will be sold in the U.S. in August for an estimated Seasonally Adjusted Annual Rate (SAAR) of 15.6 million. The projected sales will be a 10.9 percent increase from July 2013, and a 13.3 percent increase from August 2012.
“Car buyers are continuing their steady march into car dealerships and they’ll keep marching right through Labor Day weekend with attractive deals and promotions luring them in,” says Senior Analyst Michelle Krebs. “While retail sales are strong in August, automakers are further reducing their dependence on fleet sales. This month’s fleet percentage of total sales looks to be the lowest since at least 2007, and the result will be stronger resale values for customers buying new cars and healthier bottom lines for automakers.”


2/ TrueCar: August 2013 New Car Sales Expected to Be Up 14.4 Percent According to TrueCar; August 2013 SAAR at 15.75M, Highest August SAAR since 2007


For August 2013, new light vehicle sales in the U.S. (including fleet) is expected to be 1,464,214 units, up 14.4 percent from August 2012 and up 11.8% percent from July 2013 (on an unadjusted basis).
The August 2013 forecast translates into a Seasonally Adjusted Annualized Rate (“SAAR”) of 15.75 million new car sales, down less than one percent from July 2013 and up nine percent over August 2012.
“New vehicle sales defied their typical strong correlation with Wall Street in August and continued to post a healthy increase despite the lackluster performance in financial markets,” said Jesse Toprak, senior analyst for “Small SUVs became the fastest growing segment this month, with this very functional and affordable vehicle category now making up 15.5% of all sales, up from 13.5% from a year ago.”


3/ JD Power: J.D. Power and LMC Automotive Report: August New-Vehicle Sales Reach Highest Level in Seven Years

With consistency in the fleet environment, total light-vehicle sales in August 2013 are also expected to increase by 12 percent from August 2012 to 1,495,400. Fleet sales are expected to account for 15 percent of total sales, with volume of 225,000 units.
PIN and LMC data show total sales reaching a 16 million unit SAAR in August, which is the highest since November 2007, with actual unit sales the highest since May 2007.
New-vehicle sales continue the hot streak that has been trending throughout the summer selling season, with no evidence of the pace slowing, according to a monthly sales forecast developed jointly by the Power Information Network(R) (PIN) from J.D. Power and LMC Automotive.
“The industry as a whole continues to experience a robust improvement in demand, and our forecast for August is looking to be the best month for retail sales that we’ve seen in the past seven years,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power. “Moreover, this strong selling environment is occurring when consumers are spending more on new vehicles than any month on record, which is a further indication of the underlying strength of the sector.”


4/ Wards: Daily Sales Stay Steady in August Sales Forecast

The U.S. light-vehicle daily sales rate in August should remain nearly flat with July’s DSR, but with three extra selling days monthly sales should rise to nearly 1.47 million units, a new WardsAuto forecast predicts
The resulting 15.7 million seasonally adjusted annual rate would match the July SAAR but fall short of June’s 67-month high of 15.8 million units.
Market conditions are relatively unchanged from July, with robust consumer demand capped by tight inventories and overall sales dampened somewhat by below-trend fleet orders.


5/ Kelley Blue Book: Crossovers, Pickup Trucks Lift August Sales Nearly 14 Percent, According To Kelley Blue Book

New-vehicle sales are expected improve 13.6 percent in August 2013 to a total of 1.46 million units, according to Kelley Blue Book, the leading provider of new and used car information.
The seasonally adjusted annual rate (SAAR) for August 2013 is estimated to be 15.6 million, up from 14.5 million in August 2012 and down from 15.8 million in July 2013.
“Most automakers are seeing double-digit sales increases compared to last year as retail sales remain a bright spot, even with more new models entering the market,” said Alec Gutierrez, senior analyst at Kelley Blue Book. “Subaru continues to shine, estimated to be up 30 percent this month even with capacity constraints, and Honda once again has one of the strongest year-over-year growths. On the other hand, Ford could have been up double digits, but has been hampered with production issues from both the Escape and Fusion.”