In U.S. news, the Institute for Supply Management (ISM) manufacturing index showed some slight improvement, from 52.7 to 53.9—slightly better than expected.  This month, production, new orders and employment all increased, while inventories deteriorated a bit.  The ISM is at its highest level since last April, but remains below late 2010 levels. Read more

Retail Sales numbers were positive at +0.2% month-over-month, but slightly below results for the past two months and a bit below consensus.  The strongest portions of the report were electronics sales and ‘non-store’ retailers, which includes online purchases.  Additionally, sales numbers for prior months were revised upward.

Overall, retail numbers have been a potentially positive contributor to the fourth quarter’s GDP number—which could be surprisingly strong according to current estimates.  The Holiday shopping season specifically has looked to be a strong one.  Perhaps not one of the best ever by any means, but decent, according to preliminary data as well as our own anecdotal (albeit limited) mall experiences of the season. Read more

The ECB cut their benchmark rate again by 0.25% down to 1.00% in an effort to ease strains on the ‘system.’  They also expanded the range of collateral for loans to banks, increased the maturity of those loans up to three years and lowered reserve requirements—easing on all fronts.  Policymakers have been hesitant to go full-tilt on quantitative easing measures in the style of U.S. actions in recent years, partially out of the ‘moral hazard’ concern that such measures would reduce the incentive for individual member nations to get their act together.  This is not surprising, but it’s the continuing story of the stronger countries not wanting to set a precedent of bailing out the weaker ones every time things get tough. Read more

This has been another interesting week from a news standpoint.  The ECB, Federal Reserve and other major central banks coordinated efforts to enhance the availability, extend the expiration date and lower the pricing of dollar loans through liquidity swaps—the prices of which were lowered from 1.00% to 0.50% over the applicable ‘OIS’ (or Overnight Indexed Swap rate, a type of prime rate for such instruments).  Secondly, these central bank policymakers offered temporary additional swap lines in any of their currencies/jurisdictions (other than the dollar only), should they be needed. Read more

Over the holiday-shortened week, there was no Thanksgiving in Europe (figuratively and literally) as concerns remained focused on the ongoing sovereign debt crisis.  From the domestic side, the news was fairly light.

Existing Home Sales were up +1.4%, which was a surprise improvement compared to the 3% drop experienced in September.  Analysts had expected a further drop again this month.  The stronger results were directly related to better single-family sales, while condos/co-ops were unchanged.  The seasonally-adjusted number of homes on the market, however, was unchanged and sales prices fell by about -1% (-4.7% year-over-year). Read more

Economic Notes

European concerns continued to dominate other issues.  This is unfortunate, considering that U.S. news has been looking better as of late and is perhaps underappreciated.  Japan, which has also been largely ignored, grew for the first time in four quarters.

The European Central Bank purchased €10 Billion to purchase Italian and Spanish Bonds in order to bring yields in both of those nations back below 7.0%—the often-referred-to “breaking point.”  In response to criticism he could be doing more, ECB President Mario Draghi maintained that ‘price stability’ should remain the institution’s primary objective and doing otherwise might threaten its credibility (note that many central banks, including the ECB, are subject to only a single mandate, as opposed to the Federal Reserve’s dual mandate of stable prices and maximum employment).  Of course, with such a broad mandate, a wide variety of actions could be justifiable. Read more