I’m seeing headlines calling the 11% drop in housing starts announced this morning (May 17) in April from March “surprising,” but I don’t see why. Flooding and tornadoes in the South shut down construction sites in a big swath of states this spring. (April 2011 was the 10th wettest April since the start of records in 1895. The 875 tornadoes reported in the month are a record.) Housing starts in the south fell 23% from March levels.
But whether you’re surprised or not, there’s no doubt that the housing industry continues to struggle two years after the current economic recovery started. Housing starts in April came in at a 523,000 annual rate. That’s 11% below the annualized rate for March and considerably short of the 569,000 rate forecast by economists, according to Bloomberg.
There’s no quick turnaround in the cards either. Read more
Which data should you believe on the direction of U.S. economic growth?
Durable goods orders fell by 0.9% in February. Economists had expected a 1.8% increase in orders.
After supporting a reading that the economy was recovering through most of 2010, since October 2009 durable goods orders have shown a confusing pattern. In the last two quarters orders have declined in the first month of a quarter before rebounding in the second and third months of the quarter.
That pattern hasn’t held this quarter with the 0.6% drop in February following on the heels of a 3% decline in January.
The two consecutive monthly drops in durable good orders run contrary to an extremely positive increase in the ISM purchasing managers index to 68 in February. That’s the strongest ISM number since January 2004.
I think it’s too early to pick between the two data series—for that we’ll need at least another month or two of data—but I’m worried that the decline in durable goods orders is confirmed by a drop in non-defense capital goods (excluding aircraft). Read more
Two ways to look at this morning’s U.S. inflation data.
First, the Consumer Price Index (CPI) came in above expectations with a 0.4% increase in January. Economists had expected a 0.3% increase, according to Briefing.com. That puts the headline inflation rate at an annual 1.6%, according to the Bureau of Labor Statistics.
The core inflation rate rose by a monthly 0.2%. That was above the 0.1% projected by economists. The annual core inflation rate is currently 1.0%
The increase in the headline CPI of 0.4% matched the 0.4% rate for December. The core rate moved up from 0.1% in December.
Put that together with yesterday’s slightly higher than expected—0.8% versus 0.7%–monthly increase in prices at the wholesale level and inflation does indeed look to be moving higher.
Second, that increase in the inflation rate brings the current very slow recovery more into line with the average economic recovery. Read more
Crucial news is on the calendar this week for those who believe in a stronger than expected U.S. economy in 2011
Major events this week for those investors—and I put myself in the number—who believe that the U.S. economy will beat expectations this year—and take U.S. stocks upward with it.
The Federal Reserve meets for the first time in 2011 on Tuesday and Wednesday of this week with its usual statement on its view of the U.S. economy due out Wednesday afternoon. If I can judge from recent statements by Fed members, the statement is likely to express a guarded optimism about 2011 that would be, in Fed terms, an endorsement of the belief that the recovery is headed toward self-sustaining status. I don’t expect anything as straightforward as an upgrade in the Fed’s projection for U.S. growth in 2011 but I do think we’ll see some kind of shift in language that suggests the Fed is more optimistic.
If you want hard numbers, you’ll have to wait for Friday when we get fourth quarter GDP data. Read more
Not as good as wished, perhaps, but I’ll take it.
Yesterday’s (December 22) third revision to the third quarter U.S. GDP numbers pushed growth for the quarter up to 2.6%. The first estimate had put growth at 2% and the second had bumped growth up to 2.5%.
Economists were projecting 2.8% for the quarter on this report, according to a survey by Bloomberg. So this number is a bit disappointing. But considering that in the second quarter the U.S. economy grew by just 1.7%, today’s 2.6% is a good way to exit 2010. And it bodes well for 2011—or at least that’s how the stock market is reading the news today.
The theory of the moment is that the steady upward revisions of the growth rate for the quarter are an indication of rising consumer confidence that will feed into more consumer spending in 2011. Read more