Mish's Global Economic Trend Analysis

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• Euribor Hits Record Low in First Ever Dip Below 0.10%; Negative Mortgage Rates Increasingly in Play
• Chicago PMI Contracts Again, 6th Time in 10 Months; Service Economy Poised for a Big Slowdown?
• Pending Home Sales Inch Up +0.2%, Economists Expected +1.0 to +1.5%

Euribor Hits Record Low in First Ever Dip Below 0.10%; Negative Mortgage Rates Increasingly in Play Posted: 30 Nov 2015 09:01 PM PST Via translation from La Vanguardia, Euribor at Historic Lows, Mortgage Interest Drops by €166 Per Year. The 12-month Euribor, on which most Spanish mortgages are based, closed the month of November at 0.079%, setting a new record low and falling for the first time below 0.1%. The monthly closing represents a decline of 0.256 percentage points since November last year. A citizen with a mortgage of 120,000 euros will get a will save almost 14 euros per month, 166 euros per year. XTB analyst Jaime Díez explained to Europa Press that the index has experienced a 50% drop since the beginning of the month based on "fruit of the proximity of the next meeting of the European Central Bank" to be held this Thursday by president Mario Draghi. Negative Mortgage Rates Increasingly in Play Hey, why not a negative Euribor so mortgage holders get money back? Actually, negative interest rates on mortgages happened in April of this year, just not on 12-month Euribor. . The above table from on Euribor Rates. Anyone with a mortgage rate tied to 6-month Euribor or less now gets paid to have a mortgage. In Spain, most mortgages are tied to 1-year Euribor. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Chicago PMI Contracts Again, 6th Time in 10 Months; Service Economy Poised for a Big Slowdown? Posted: 30 Nov 2015 12:00 PM PST Volatility in the Chicago PMI likely has economists scratching their heads. Following last month's surge comes this month's contraction. It's been off and on for 10 months. No swing in either direction has lasted more than two months. Yet, the overall trend has been weakening for a year and economists missed this month's forecast by a mile. The Econoday Consensus estimate was for a reading of +54.0 in a range of 52.8  to 56.5. The actual reading was 48.7. Volatility is what to expect from the Chicago PMI which, at 48.7, is back in contraction in November after surging into solid expansion at 56.2 in October. Up and down and up and down is the pattern with prior readings at 48.7 in September (the same as November) and 54.4 in August. New orders are down sharply and are back in contraction while backlog orders are in a 10th month of contraction. Production soared nearly 20 points in October but reversed most of the gain in November. Despite November's weakness, employment is up slightly. Prices paid is in contraction for a fourth straight month. Though this report points to November weakness for the whole of the Chicago economy, the volatility of the report should limit its impact on the month's outlook. ISM Chicago vs. Manufacturing ISM Something clearly changed in February, and it wasn't the weather. Service Economy Poised for a Big Slowdown? The Chicago PMI survey includes both manufacturing and non-manufacturing components so it is not directly comparable to pure manufacturing surveys. That makes matters worse actually, given economists generally consider the service economy to be in good shape. Bloomberg proposes the volatility of the report should limit its impact on the month's outlook. I suggest volatility is a sign of a trend change as well as underlying weakness. And the backlog of orders, one place where there has been consistent contraction for 10 months, does not bode well for future hiring needs. All things considered, the Chicago PMI is a warning that the service economy may be on its last legs. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Pending Home Sales Inch Up +0.2%, Economists Expected +1.0 to +1.5% Posted: 30 Nov 2015 09:57 AM PST Pending home sales for the month of October were nearly flat vs. economists expectations of something much higher. The Wall Street Journal reports Pending Home Sales Rise 0.2% in October, economists had predicted a 1.5% increase. The Bloomberg Econoday consensus was for a +1.0% gain. Sales of existing homes have been soft and are not likely to pick up in the next few months based on October's pending sales index which is up only 0.2 percent. Year-on-year, the index is up 3.9 percent which matches the rate of gain for final sales during October. Flatness, unfortunately, is the theme. The Northeast did the best in October, up 4.5 percent for a year-on-year plus 6.8 percent. The West is next with pending sales up 1.7 percent for a year-on-year gain of 10.4 percent. Bringing up the rear are the Midwest, down 1.0 percent on the month for a year-on-year plus 3.3 percent, and the largest region which is the South, down 1.7 percent in October for the only negative year-on-year reading of minus 0.3 percent. The National Association of Realtors cites low supply of available homes as a negative for sales and warns that prices in some markets are rising too fast, especially for first-time buyers. The association cites strength in the Northeast as an example, a region where price appreciation is lower and supply greater. The new home market isn't doing that much better than existing homes, with sales up 4.9 percent year-on-year in the latest available data. Watch for construction spending on tomorrow's calendar, one aspect of the housing market that has been showing solid strength. Housing has undeniably cooled and so has retail spending. Manufacturing is in an outright recession. Jobs and autos have been the two main drivers of the economy. Jobs are a hugely lagging indicator. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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