Tepid growth (in the U.S.) is still better than no growth (in the EuroZone) in today’s economic reports

It was a tale of two economies today.

Data showed the U.S. economy growing tepidly.

Which was still a quite a bit better than data from Europe that showed the EuroZone headed toward recession.

In the United States initial claims for unemployment dropped to 351,000 for the week ended February 25—but the numbers showed a drop only because the prior week’s initial claims figures were revised upward to 353,000 from 351,000. (Economists had projected initial claims of 355,000 for the week.) Personal spending climbed just 0.2% in January, well below the 0.4% forecast by economists surveyed by Briefing.com. Income grew by 0.3%, less than the 0.4% projected by economists. And the Institute for Supply Management manufacturing index dropped to 52.4 in February from 54.1. The index stayed above the 50 level that separates growth from contraction but a move down to 52.4 is a move in the wrong direction.

But the U.S. news was a stroll on the beach compared to the news from the EuroZone. Inflation in the European Union climbed to 2.7% in February from 2.6% in January. Unemployment in the EuroZone hit 10.7% in January, the highest since the start of the euro in 1999. The EuroZone purchasing managers index did edge higher to 49.0 in February from 48.8 in January but a reading below 50 still pointed to a contracting economy. The German purchasing managers index for manufacturing remained above 50 at 50.2 in February but that marked a move lower (from 51.0) for the EuroZone’s strongest economy.  The French purchasing managers index came in at 50, down from 50.2 in January and in Italy it remained below 50 at 47.8.

European stocks rose on the day on news of progress in finalizing the new Greek rescue package and on well-subscribed Spanish bond auctions. But the economies of the EuroZone continue to show signs of slowing. At some point that economic fact becomes a problem for countries relying on austerity to meet their budget deficit targets.

That “problem” has already shown up in the European summit that began today with Spain asking for flexibility on meeting its budget deficit targets for 2011 and 2012.

Investors are looking at a full schedule of news on the U.S. economy this week. Which is especially important to this stock market because, more than anything else, it’s anticipation of solid U.S. economic growth that supports stock prices at current levels.

On Tuesday we get data on durables orders for January. In December durables orders climbed 3.0% (economists had expected a 2% increase) on top of a 4.3% (after an upward revision) gain in November.

This time around economists are expecting a 1.4% drop in durables orders.

That headline won’t be terrible news if most of the drop came from the very volatile aircraft sector, where the timing of a big order can easily send overall orders from plus to minus and back again. Watch the numbers of orders for capital equipment. This is the stuff that companies order to make more stuff and the rise or fall of this number is an important indicator of business confidence in the economy. If CEOs think the economy is likely to grow, they’ll put in orders for more production machinery. A drop in this number would be a sign that no matter what U.S. consumers say about the domestic economy, CEOs see the global economy slowing.

Wednesday brings the second revision of fourth quarter GDP numbers. Read more

Good news this morning on unemployment–with the usual seasoning of worry

(Guarded) optimism reigns this morning after initial claims for unemployment came in below forecast and consumer confidence climbed.

The “guarded” nature of today’s optimism, however, results from yet another cut to U.S. third quarter GDP growth on the third revision to the statistics and a sneaking suspicion among economists that the good news on the economy is only temporary.

As of 1:30 New York time the Dow Industrial Average was up 0.6% and the Standard & Poor’s 500 Stock Index was up 0.8%. In Europe the German DAX Index closed up 1.1%, the French CAC 40 was up 1.4%, and the Spanish IBEX 35 was up 1%.

New claims for unemployment in the United States fell by 4,000 to 364,000 for the week ended on December 17, the Department of Labor announced. That’s the lowest level for initial claims since April 2008. Economists surveyed by Bloomberg had projected an increase in initial claims to 380,000 for the week.

The revised Michigan Consumer Sentiment Index climbed to 69.9 in December from an initial reading of 67.7. Economists had expected a revision to 68.0.

It’s only logical that a drop in new claims for unemployment would go together with improved consumer confidence—if fewer people are losing their jobs, consumers feel better about spending. Lending a helping hand are the cheapest gasoline prices since February. That puts more money in consumers’ wallets and takes some strain off of family budgets.

But we very seldom get good news these days without a caveat—and today is no exception. Read more

Can you trust the headlines about Black Friday retail sales?

Yesterday, November 28, stocks soared in part at least, since I think news/rumors from Europe had something to do with the rally, on reports that retail sales on Black Friday, the official start of the holiday shopping season, climbed by 6.6% from the same day in 2010. (The day after Thanksgiving is called Black Friday since it’s the date on which many U.S. retailers move into the black for the year.)  Online sales climbed by 24.3% from 2010.

The figures have met with a lot of skepticism—which I find encouraging for stock prices. It means there are still a lot of investors out there who aren’t convinced that the U.S. economy isn’t going to lay an egg in the fourth quarter. If the data over the next couple of weeks converts some of them, their change of mind will push stocks higher through—perhaps as long as–the end of the year.

We’ll get our next read—and our next set of headlines on retail sales—next Monday when we get data on retail sales for the December 2,3,4 weekend. Analysts will study that data to see if the Black Friday weekend was so strong because it cannibalized sales from other weekends in the holiday shopping season.

A lot of the skepticism comes from the very obvious conflict between strong retail sales and a lousy economy. But recent data from the Federal Reserve makes it clear where the money for this round of consumer spending could be coming from. Read more

October retail sales climb 0.5%, forecast a strong holiday shopping season

Economists had projected that October U.S. retail sales would be up by 0.4%, according to a survey by Briefing.com. Numbers released by the Commerce Department this morning showed actual sales up 0.5%.

I think that’s enough to keep the optimism flowing for the end of the year holiday shopping season. And to sustain belief that the U.S. economy is stronger than anyone expected back in August. As I read these numbers, they point to GDP growth above 2% for the fourth quarter.

The big drivers were sales of consumer electronics and cars. Sales at electronics retailers climbed 3.7% in October. That’s the fastest rate of growth since November 2009. Sales at auto dealers climbed by 0.4% after an increase of 4.2% in September. That added up to a 13.2 million annual sales rate in October, the highest since February and up slightly from the 13.04 million annual rate in September.

We also had good news on the inflation front this morning as well. The producer price index, a leading indicator of inflation at the consumer level, dropped by 0.3%. That was a bigger drop than the 0.1% that economists had projected according to a survey by Bloomberg and the first decline in four months.

Now the big question for the holiday retail season is how deep the discounts will be. Too deep and the stores will be full of shoppers but retailers won’t be making much money.