October 28, 2011 Patrick Oliver-Kelley

In the US, orders for big ticket items fell in September and durable goods orders fell 0.8% the third decline in four months. While this year has been a difficult one for many sectors of the American economy, the housing sector—little by little, and bit by bit—has been firming up over the course of 2011. It is not dead as a stout, but certainly as sick as a parrot. The one exception is multifamily housing where a steady uptrend is underway.

Finally, the latest CPI figures show that rents in America are up 2.1% over the past year and 0.9% in the last three months alone—nearly twice the increase in core inflation. US wholesale prices rose broadly point to inflation pressures that may limit the Feds ability to provide more stimulus. All in all, the US economic picture is less than encouraging.

Eurozone

The big news was European leaders agreed on a package of initiatives including a 50 percent hair cut to bank portfolios of Greek debt, requirements for banks to increase capital reserves and an agreement to increase the EU bailout fund. All three issues- the fate of Greece, the ‘firewall’ and the recapitalization of Europe’s banks – revolve around, in some way Italy: if Greece’s debt is restructured, will the markets then turn on Italy, the next most indebted state in the Eurozone? Is the firewall high enough? Does the plan place an undue burden on Italy? While the plans give reason for cautious optimism, all eyes are now on Italy and the Italian PM has been unwilling to introduce reforms. Sadly, business confidence in Germany, previously the only bright spot in the Eurozone, deteriorated for the fourth consecutive month.

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