Measuring the economy’s momentum

Mitchell Hartman Oct 27, 2015

Measuring the economy’s momentum

Mitchell Hartman Oct 27, 2015

This is a busy week for economic statistics.

New Home Sales for September:
New home sales (reported Monday) fell to an annual rate of 468,000 in September, which is significantly below the low-end estimate from Wall Street analysts, and the lowest rate since November 2014. But, over the past 12 months, new home sales have been gradually trending higher.

Durable Goods Orders for September (Tues. 8:30 a.m. ET)
Durable goods orders are expected to have fallen 1.0 percent  month over month. Durable goods have been hurt over the past year by the slump in manufacturing and exports, caused in turn by the strong U.S. dollar. Over the past year, there has been moderate decline in the annual rate of growth.

S&P Case Shiller Home Price Index for August (Tues. 9 a.m. ET)
The 20-city index is expected to be up 0.1 percent month/month, and 5.1 percent year/year. Home-price increases have moderated significantly over the past year, though they are still running in the 7 to 10-percent increase range in the hottest markets, such as Denver, San Francisco, Portland, Seattle, Dallas and Miami.

Consumer Confidence Index for October (Tues. 10 a.m. ET, Conference Board)
The consensus is for a minor tick-down (0.5) to a reading of 102.5, which is still considered positive. This index has moved gradually higher since fall 2012. And it has shown resilience lately, as financial markets and the global economy were very turbulent.

And, how do economists parse these monthly stats — likely to be coming in up, down, and all around?

“The U.S. economy is more like an aircraft carrier than a motorboat,” said John Canally at LPL Financial. “It isn’t going to turn on a dime. When you have something that large, it takes a couple of months.”

Canally said that last year, the economy was cruising along at good speed. But by mid-2015, investors and the Federal Reserve had all taken notice of China’s long-term slide from booming growth. That has led to a cascade of falling oil and commodity prices and a rising dollar — all of which hit U.S. exports and manufacturing hard.

But Canally said that overall, domestic economic momentum hasn’t slowed precipitously.

“Manufacturing is only 30 percent of the economy,” he said. “The other 70 percent of the economy — things like housing and the consumer — are doing just fine.”

Labor economist Michael Strain at the American Enterprise Institute takes what some call the “dashboard” view of the economy, following a range of broad and narrow indicators on the economy’s speed, direction, efficiency, utilization of labor. Here’s what he finds: “the steady but too-slow recovery,” which he said has been a problem for years now.

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