"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Thursday, January 20, 2011

Existing Home Sales! Leading Indicators! The Philadelphia Fed!

First off, existing home sales.  You want to see this up for the trickle-down impact.  It's not as significant as new home sales, but people will still tend to take out mortgages and buy durable goods when they buy an existing home, so good numbers are still things that can make the market happy.  And the market is looking for a little happiness on this one.  November saw 4.68 million new sales, and analysts are calling for 4.9 million sales in December.  For the actual figures we turn, as always, to the National Association of Realtors.  How did things turn out?  On a seasonally adjusted basis, we saw an expectations-beating 5.28 million sales.  The national median existing home price was $168,800, and distressed homes rose to a 36% market share.
Next up, The Conference Board's index of leading indicators.  Last month, the index was up 1.1, and analysts are expecting things to cool off to only a 0.6 increase on the index.  And what does The Conference Board say to this?  The Conference Board says "The US LEI Increases Sharply Again".  December sees us up 1.0 (beating expectations) to a level of 112.4.  And why do you care?  You care because leading indicators are seen as pointing the direction the economy is heading.  If the leading indicators are pointing up, it should mean good times ahead.
Finally, we have the Philadelphia Fed's January 2011 Business Outlook Survey.  December's results were revised downwards from 24.3 to 20.8 (not great), but the analysts are still optimistic and expecting to see a 20.0 for January.  The actual result is a 19.3, close but no cigar.  On the other hand, this is the fourth consecutive month of positive readings for the index, which shows continued improvement in new orders, demand for manufactured goods, and shipments.  Also, 25% of reporting firms indicated an increase in employment while only 7% reported a decline.  Costs are increasing (which we knew from the PPI), but the majority of reporting firms expect to see growth continue.
So what, you say?  Well, this is rather like the Empire State Manufacturing Survey (from Monday), but bigger.  The Philadelphia Federal Reserve District covers a larger geographic area, so it's considered to be a little more representative of the nation's economic activity.  The takeaway that traders are likely to get from this report is that, while things aren't perfect for manufacturers, they are looking up.  Strongly.

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