Deller's two cents: Not too much to report this week, but what was released was mostly good news. The tide has turned, rather than a slow trickle of constantly bad new we are now seeing a constant trickle of good economic news.
Economic Week in Review: A wintry mix
January 21, 2011
The light slate of economic news this week focused on the housing market, where snow or rain across much of the United States put a damper on new-home construction. On the bright side, existing-home sales grew at their fastest month-over-month rate ever (although the trend remains well below housing-boom highs) and the index of leading economic indicators rose again. In international news, President Obama hosted China's President Hu Jintao for an official state visit to Washington, D.C., to discuss cooperation on a variety of issues. For the week ended January 21, the S&P 500 Index fell 0.8% to 1,283 (for a year-to-date total return-including price change plus dividends-of about 2.1%). The yield of the 10-year U.S. Treasury note rose 9 basis points to 3.44% (for a year-to-date increase of 11 basis points).
Leading indicators flash green again
Signaling a green light for expansion of the U.S. economy, the Conference Board's index of leading economic indicators rose a better-than-expected 1% in December. This was the sixth consecutive monthly increase in this gauge of the economic outlook for the next several months. Only two of the ten indicators slipped-supplier deliveries and manufacturers' new orders. Ataman Ozyildirim, an economist at The Conference Board, observed, "While the Leading Economic Index points to an economic expansion that is gaining further traction, its components still suggest the expansion path may be uneven."
Vanguard economist Roger Aliaga-Díaz commented, "We clearly still see various risks to the outlook for recovery. However, we also find reasons for cautious optimism because the balance of risks has tilted toward firmer growth. For the first time since the start of the recession, Vanguard's proprietary leading economic indicators are signaling a positively skewed distribution for future U.S. job growth."
Housing starts stall
New-home construction dipped more than 4%, to an annual rate of 529,000 units in December, unable to sustain the upward momentum gained in November (which was revised downward). Single-family homes were primarily responsible for the slump. With privately owned homebuilding generally falling since the springtime expiration of buyers' tax incentives, December's rate was about 8% below a year ago. For calendar-year 2010, housing starts increased by about 6%-the first annual increase since 2005 but the second-lowest number of units in about five decades. Still, a more than 16% jump in building permits may be a signal of higher activity levels to come.
Sales of existing homes climb
While it may have been challenging for builders to break ground on new homes in December, the climate seemed hospitable for existing-home sales, which surged more than 12%. All regions of the country posted double-digit increases. Even so, December sales were about 3% below a year ago. Lawrence Yun, chief economist for the National Association of Realtors, noted, "The December pace is near the volume we're expecting for 2011, so the market is getting much closer to an adequate, sustainable level."
The inventory of homes available for sale at the end of the year decreased to an approximately 8-month supply, compared with more than 9 months in November. But the national median price for existing homes was about 1% lower than in December 2009.
The economic week ahead
A fuller slate of economic reports is on tap for release beginning on Tuesday with the Conference Board's index of consumer confidence, new-home sales and FOMC monetary policy on Wednesday, and durable-goods orders on Thursday. The week wraps up on Friday with the employment cost index and the first report on gross domestic product for the fourth quarter and all of 2010.
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Steven C. Deller
Professor and Community Development Economist
Department of Agricultural and Applied Economics
515 Taylor Hall --- 427 Lorch Street
University of Wisconsin-Madison/Extension
Madison, WI 53706
608-263-6251
"I started out with nothing and I have most of it left."
Seasick Steve
