Mixed U.S. Data Received Positively

February 28, 2012

Despite some weaker-than-expected data released today, U.S. share prices are higher, with the Dow at this writing trading above the key 13K level.

  • A 4.0% dive in durable goods orders was the largest drop in three years, but such followed back-to-back increases of 4.2% in November and 3.2% in December and left January’s level of durable goods orders 8.8% higher than a year before.  Core durables, excluding aircraft and defense, sank 4.5% last month but were 6.5% higher than in January 2011.
  • According to the Case-Shiller index of housing prices in 20 metropolitan areas, prices fell 0.5% in December after a 0.7% decrease in November.  They were 4.0% lower than at end-2010 and at a fresh low for the move some 33.8% below the peak in 2Q06.  Foreclosures need to be unloaded before the housing market truly hits bottom.
  • Chain store sales according to weekly ICSC-GS and Johnson-Redbook measures were choppy in February, neither robust nor awful.  Continuing improvement in the labor market is needed to sustain personal consumption that is driven by higher incomes and not a low savings rate.

Two of today’s economic data releases were very buoyant.  Consumer confidence measured by the Conference Board leaped 9.3 points to a twelve-month high of 70.8.  Such bottomed at 40.9 in October and also printed below 50 in August and September.  70.8 remains below typical readings prior to the 2007 onset of the financial crisis.  Separately, the Richmond Fed manufacturing index advanced eight points to 20 in February from 12 in January and 3 in December.  A score of 20 constitutes the fourth best reading since November 1994, indicating a resurgent health in American manufacturing.  A soft dollar would help maintain this welcome development.

Wealthier Americans haven’t done as poorly as the mad-as-hell tone of the presidential election campaign suggests.  Since March 9, 2009, seven weeks into the Obama Presidency, the Dow, S&P 500, and Nasdaq indices have advanced by 98.7%, 102.4%, and 135.4%.  Real GDP, by contrast, only increased 6.0% or 2.1% per annum.  Stock valuations look cheap from their 2000 peaks.  Investors are predisposed to giving the U.S. outlook the benefit of the doubt, which means on days like today when the statistics are mixed, people with funds to invest are inclined to see a cup half full even as they complain about how much better the economy ought to be.  Fed policy helps, too.  Interest rates are too low for one to save for retirement through safe fixed income assets.  The wild cards remain the uncertain degree of exposure of the U.S. banking system and economy to a European debt meltdown and how much drag will be felt in the U.S. economy later this year because of elevated oil prices.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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