U.S. new home sales beat expectations in July - Reuters News

WASHINGTON, Aug 25 (Reuters) - Sales of new U.S. single-family homes increased to their highest level in more than 13-1/2 years in July as the housing market continues to show strong immunity to the COVID-19 pandemic, which has plunged the economy into recession and thrown tens of millions of Americans out of work.

The Commerce Department said on Tuesday new home sales rose 13.9% to a seasonally adjusted annual rate of 901,000 units last month, the highest level since December 2006. New home sales are counted at the signing of a contract, making them a leading housing market indicator. June's sales pace was revised upward to 791,000 units from the previously reported 776,000 units.

Economists polled by Reuters had forecast new home sales, which account for about 14% of housing market sales, gaining 1.3% to a rate of 785,000-units.

U.S. consumer confidence unexpectedly falls in August - Reuters News

WASHINGTON, Aug 25 (Reuters) - U.S. consumer confidence fell for second straight month in August as households worried about the economic outlook.

The Conference Board said on Tuesday its consumer confidence index dropped to a reading of 84.8 this month from 91.7 in July. Economists polled by Reuters had forecast the index edging up to a reading of 93 in August.

Germany on "road to recovery" as business morale brightens further - Reuters News

Sentiment in manufacturing, services improves

Ifo: German economy is on the road to recovery

Export expectations are falling slightly

Recovery hinges a lot on German consumers

By Michael Nienaber and Rene Wagner

BERLIN, Aug 25 (Reuters) - German business morale improved more than expected in August as both manufacturing and services picked up steam, a survey showed on Tuesday, boosting hopes that Europe's largest economy is set for a strong recovery following the massive coronavirus shock.

The Ifo institute said its business climate index rose to 92.6 from a downwardly revised 90.4 in July. This was the fourth monthly increase in a row and came in better than economists' expectations for 92.2.

Ifo economist Klaus Wohlrabe said he expected the economy to grow by almost 7% on the quarter in the July-September period after it posted a record plunge of 9.7% in the previous three months at the height of the pandemic. (Full Story)

"The German economy is on the road to recovery," Ifo President Clemens Fuest said in a statement, adding that firms assessed their current business situation much more optimistically than in the previous month.

The Ifo survey recorded the strongest gains in business morale among manufacturers and service providers while sentiment among construction firms was also improving.

Wohlrabe added a note of caution, however.

"The upswing is still fragile. We have not yet reached the pre-crisis level," he told Reuters, saying the latest spike in new infections underlined the risk of a second wave which could derail the recovery again.

Wohlrabe also pointed out that export expectations had fallen again slightly, in a sign that doing business abroad remained difficult for many German companies.

RECORD NEW DEBT

Germany's parliament has suspended its debt brake this year to allow the government to finance its crisis response with record new debt of 217.8 billion euros ($257 billion).

The suspension, following years of balanced budgets, means the German state recorded a budget deficit of 51.6 billion euros from January to June, the statistics office said. Measured by the EU's Maastricht criteria, this is a deficit of 3.2%.

Employment has proven relatively robust during the crisis with the government's efforts to shield the labour market from the coronavirus shock with short-time work schemes paying off.

The relatively mild impact on employment has helped to stabilize household income and this in return has led to a big increase in household saving as consumers were unable to spend much during the lockdown months from mid-March until May.

The savings rate almost doubled to 20.1% in the second quarter compared with the previous year, the office said.

The German central bank expects household spending to drive a strong recovery in the third quarter, though the economy might not reach its pre-crisis level before 2022.

The government's stimulus measures include a temporary VAT cut from July to December worth up to 20 billion euros, which Berlin hopes will give household spending an additional push.

"The reopening of the economy will give the German economy a strong boost in the period from July to September," VP Bank economist Thomas Gitzel said.

But the moment of truth may come in the autumn and winter months, which could see a wave of bankruptcies, Gitzel warned.

"In addition, the negative consequences of structural change in the automobile industry are becoming increasingly evident," Gitzel said, pointing to many small suppliers in the sector that are struggling to adapt to digitisation and electrification.

German economy contracts at record pace, recovery hinges on consumers - Reuters News

GDP shrinks 9.7% q/q from April-June

Savings rate doubles as income remains stable

Central bank expects consumers to drive recovery

By Michael Nienaber

BERLIN, Aug 25 (Reuters) - The German economy contracted by a record 9.7% in the second quarter as consumer spending, company investments and exports all collapsed at the height of the COVID-19 pandemic, the statistics office said on Tuesday.

The economic slump was much stronger than during the financial crisis more than a decade ago, and it represented the sharpest decline since Germany began to record quarterly GDP calculations in 1970, the office said.

Still, the reading marked a minor upward revision from an earlier estimate for the April-June period of -10.1% that the office had published last month. (Full Story)

Consumer spending shrank by 10.9% on the quarter, capital investments by 19.6% and exports by 20.3%, seasonally adjusted data showed.

Construction activity, normally a consistent growth driver for the German economy, fell by 4.2% on the quarter.

"The second quarter was a complete disaster," VP Bank economist Thomas Gitzel said. "Regardless of whether it is about investments, private consumption, exports or even imports -everything was in free fall."

The only bright spot was state consumption, which rose by 1.5% on the quarter due to the government's coronavirus rescue programmes, the office said.

The German parliament has suspended the debt brake this year to allow the government to finance its crisis response and fiscal stimulus push with record new debt of 217.8 billion euros.

The fiscal U-turn after years of balanced budgets means that the German state recorded a budget deficit of 51.6 billion euros from January to June, the statistics office said in a separate statement.

That represents a deficit of 3.2% of economic output as measured by the EU's Maastricht criteria.

Employment edged down by 1.3% on the year to 44.7 million in as sign that the government's efforts to shield the labour market from the coronavirus shock with its short-time work programme are paying off.

The relatively mild impact of the crisis on employment helped to stabilize income for many households, which together with the reluctance to consume, led to a considerable increase in household saving.

The savings rate almost doubled to 20.1% in the 2nd quarter compared to the previous year, the office said.

The German central bank expects household spending to drive a strong recovery in the third quarter, though the economy might not reach its pre-crisis level before 2022.

The government's stimulus measures include a temporary VAT cut from July to December worth up to 20 billion euros, which Berlin hopes will give household spending an additional push.

"The reopening of the economy will give the German economy a strong boost in the period from July to September," Gitzel said, but he added that the moment of truth would come in the autumn and winter months, which could see a wave of bankruptcies.

"In addition, the negative consequences of structural change in the automobile industry are becoming increasingly evident," Gitzel said, pointing to many small suppliers in the sector that are struggling to adapt to digitisation and electrification.