This winter’s plethora of snow and bad weather was behind much of the economic news lately, from unemployment claims to retail sales. Housing starts are no exception.

Snow in February sunk housing starts in the South and Northeast, where starts declined by about 10 to 15 percent; starts rose in the Midwest and West. Multifamily starts dropped a steep 30.3 percent overall.

The pace of permits continued to fall, which signals a slowdown for new housing in the upcoming months.

The UMich sentiment index and the Dept of Commerce (DOC) data released today remind me of the recent flap between John Mayer and Jennifer Aniston: heading in opposite directions and not looking back. Why the divergence? If retails sales are on an upward course, why isn’t consumer sentiment tracking retail sales estimates? Or, the more relevant question, why aren’t retail sales tracking the same course as consumer sentiment?

The UMich consumer confidence index for Feb was a dismal, and falling, 73.6, but according to the Dept of Commerce, retail sales for February (less autos) was unexpectedly strong, rising 0.8 percent over Jan and 3.9 percent over Feb2009. Today’s consumer sentiment reading registered at 72.5, with the future expectations index showing particular weakness.

Does this mean we can expect another uptick in consumer spending next month? (The short answer: All Signs Point to Yes.)

ZeroHedge recently posted some interesting commentary about discrepancies between Gallup Sales data and data released by the Dept of Commerce, favoring the Gallup approach, which showed marked declines in consumer spending since the beginning of the year. His reasoning: Gallup measures self-reported discretionary expenditures; on the other hand, the Dept of Commerce uses statistical sampling methods with retail store receipts and then makes ‘adjustments’ (aka: the fudge factor.)

Then, there is the picture presented by state and local sales tax figures:

Let’s take a more unscientific look at some potential causes for the diverging data. Here are your top ten reasons for doubting the DOC report:

Reason #10. Consumers have oppositional defiant deficit disorder (ODD).

Rationale: Even though the economy continues to shed jobs, personal income is down, and home equity loans are harder to come by, consumers are basically irrational and only want what they can’t afford.

Reason #9. Eyebrow-threading is out this year.

Rationale: The Commerce report measures only retail sales, not services; therefore, the data is biased to the positive because consumers are cutting back on luxury services like eyebrow-threading in favor of more ‘stuff.’

Reason #8. Snow makes people want to buy things, particularly electronics and appliances.

Rationale: That big TV doesn’t look all that big with all that white out there AND it’s blinding. Need bigger TV with higher resolution.

Reason #7. Speaking of snow, White Sales!

Rationale: It’s the prices, stupid!

Reason #6. The future will disappoint: so will death, but at least it is certain.

Rationale: Consumers don’t like what’s going on but, hey, uncertainty can be debilitating: at least I’m buying (doing) something.

Reason #5: People lie.

Rationale: Really.

Reason #4: Advertising works.

Rationale: Consumers are sheep and easily manipulated. Look down! Look up! I’m on a horse!

Reason #3: Pricing of self-help books and other necessities surged last month.

Rationale: The Commerce report measures total receipts; therefore, the upswing is due to price changes, not surging demand. We can only assume the ‘Come On, Get Happy’ crowd came out in full force last month to buck the trend, despite the price gouging.

Reason #2: The Amish scare people.

Rationale: Fear is a powerful motivator and oppositional, extreme behavior usually follows. Society is at risk.

Reason #1: The adjustments are forthcoming.

Rationale: Hi, I’m from the government and here to help you.

What are your thoughts?

This year is shaping up to be a better year, tradewise, than 2009. But you wouldn’t know it by looking at today’s jobless claims.

The latest data from the US Census Bureau show a bullish picture for exports and a strengthening economic position at home when compared to January 2009 data. Seems like US manufacturers are getting more aggressive now that domestic demand can’t carry the load alone.

According to the latest U.S. International Trade report:

“In January, the goods and services deficit increased $0.4 billion from January 2009. Exports were up $18.7 billion, or 15.1 percent, and imports were up $19.1 billion, or 11.9 percent.”

The numbers reflect across the board increases from 2009 in exports for Industrial Supplies/Materials ($7.0 billion), Automotive ($3.4 billion), Consumer Goods ($2.1 billion), Foods/Feeds/Beverages ($1.7 billion), Capital Goods ($1.6 billion), and Other Goods ($0.4 billion) ─ all bullish signs for US industries.

Services exports also increased, from $2.7 billion in January 2009 to January 2010.

As the charts indicate, although exports showed a slight decline in the month of January (0.3 percent), imports fell even more (1.7 percent). Stronger net exports contribute to a rosier GDP and a smaller the trade deficit is bullish for the dollar.

The bad news is that we aren’t seeing any corresponding strength in employment as jobless claims remain high with no relief in sight. Thus, US companies will continue to attack foreign markets in the quest for revenue growth.

Now that the “weather” effect is out of the housing picture, the follow-up question for the market is: Are US homebuyers sidelined waiting for lower prices or surging to beat the tax credit expiration?

For the week ending 03/05/2010, the MBA survey shows that the change in mortgage applications, for both purchases and refinancing, edged up a mere 0.5 percent.

Applications for new purchases applications rose 5.7 percent over the prior week increase of 9 percent. Not a surge by any account, but still, a positive sign. And whether or not potential buyers are sidelined waiting for prices to drop as more houses enter the market might be irrelevant. Assuming there is a larger pool of potential buyers “out there,” buyers must still qualify under stricter credit rules.  So even with government support in the form of tax credits, the market appears stalled: sellers are resisting dropping prices further while buyers are looking for lower prices and underwater homeowners lucky enough to buck the foreclosure trend are stuck in a holding pattern.

Note also that refinance applications dropped 1.5 percent from the prior week, suggesting a slowing down in home refi’s. (The average contract rate for 30-year fixed-rate mortgages was 5.01 percent last week, up 6 basis points from 4.95% for the prior week).

Enter a new incentive for short sellers via the Obama administration. Optimists may still hold out hopes for a last-minute buying surge from tax credits, but momentum slowed last week. And whether this latest move by the Obama administration is enough to get market to pick up steam is anyone’s guess, but it looks like a hefty dose of something oily is needed.

What’s your local housing market doing? Let us know in the comments below or click here to join the discussion in our new Forum …

Today’s job numbers show that the pace of job cuts continue to moderate, but calling a turnaround in hiring imminent may not only be premature, but overly optimistic. Like lost equity in housing markets, the bulk of those jobs may not be coming back or may not come back for some time.

The one bright spot on the horizon was medium-sized businesses, which had a net gain in jobs for February. Employment in manufacturing also rose. Job cuts continued at large and small businesses in February, including construction.

Overall, announced layoffs for February fell to 42,090, the lowest level since February 2008, according to data collected by the job placement firm Challenger, Gray & Christmas Inc. in Chicago.

Pharmaceuticals led the pack with 17,687 cuts followed by cuts in government and at non-profits at 4,628. The total includes planned downsizing in foreign affiliates.

However, January’s job loss total was revised from 22,000 to 60,000 jobs, making the data a little too soft to draw hard conclusions. The total for February of this year is 77 percent below the 186,350 jobs cut a year ago, in February 2009.

In the ADP employment report, which focuses on non-farm employment, private sector employment decreased by 20,000 in February. According to the report, hiring increased in medium-sized businesses (50-499 employees) by + 8000 and in manufacturing by + 3000.

The breakdown for small businesses (less than 50 employees) follows:

Total small business employment: – 18,000
Goods-producing sector: -25,000
Service-providing sector: + 7000

The jobs increase in the small business service sector was not enough to offset job cuts in the goods-producing sector. The data confirm that the small-business economy continues to shake out growth wherever it can find it, but the net decrease in jobs indicates a turnaround may be far off.

(Note that data in the ADP report is seasonally adjusted; data in the Challenger report is not seasonally adjusted.)

Do you think jobs in the US are coming back or gone overseas forever? Let us know in the comments below or click here to join the discussion in our new Forum.

In other words, is this all there is? That was the question I had to ask myself today after reviewing weeks of economic reports that moved the needle slightly up or down, or reversed a trend ever so slightly, or gave multiple data points that danced around the same reading.

Looking for solid news of a rebounding recovery has been as elusive as the proverbial needle in a haystack. So the question remains, are we looking at it…. is the haystack the recovery? Is this as good as it gets?

Let’s take a look at the personal income and consumption report today from the Department of Commerce. The good news is if you are looking to buy a car, this might be a good time to do it ─ consumer spending remains soft, particularly in durable goods (up only 0.1 percent) but only if you have the money to spend, as personal income rose a lower-than-expected 0.1 percent for the month of January. Savings also dropped and spending on services was weak, up a modest 0.2 percent. Prices, however, remain tame with an increase of 0.0 percent for the month and a year-to-year increase of only 1.4 percent.

Recently, the construction industry became the focus of economic optimism. The larger-than-expected 2.8 percent January increase boosted hopes that the housing recovery was beginning to take root. But was the concentration of new apartment housing a sign that the “American Dream” (no, not beating Canada for the gold) of owning a home would again be out of range for most folks?

According to today’s construction spending report from the Department of Commerce, construction spending dipped by another 0.6 percent in January following a revised 1.2 percent dip in December. The biggest takeaway from the report: the fact that total construction is down by 9.3 percent for the year. Enough to start thinking about what kind of a boost construction could get following a small earthquake.

And then there’s the ISM Manufacturing Index for Feb, which came in at 56.5. The good news is manufacturing continues to hum along, boosting employment by 3 points to 56.1 and replenishing inventories. New orders, however, moderated their previously accelerating pace, dropping below 60 for the first time in several month. Backlog orders were up 5 points to 61, which bodes well for the sustainability factor.

So, again, is this the recovery we’ve all been hoping for? According to the famous lyrics of that existential lament “Is that all there is?” if that’s all there is my friends, then let’s keep dancing.

Data Source: Haver Analytics

GDP revisions for fourth quarter 2009 confirmed that production remained stronger than demand and the inventory effect moved GDP higher to 5.9%.

The initial estimate for GDP growth in the fourth quarter of 2009 showed a surprisingly strong 5.7 percent change from the previous quarter (seasonally adjusted). A decelerating pace for inventory drawdowns contributed in large part to the stronger-than-expected number. The final sales figure – GDP less change in private inventories – also showed strength, however, increasing 2.2 percent over the prior-quarter increase of 1.5 percent.

The GDP figure was revised upward today to 5.9 percent by the Bureau of Economic Analysis at the U.S. Department of Commerce. According to the report, the change is 0.2 percentage point, or $6.1 billion, higher than the advance estimate issued last month, primarily reflecting revisions to “private inventory investment, to exports, and to nonresidential fixed investment that were partly offset by an upward revision to imports and downward revisions to PCE and to state and local government spending.”

Also noteworthy in the report, the final sales figure for domestic product in the fourth quarter was revised downward to 1.9 percent, and the GDP price index was revised down to a 0.4 percent rise, compared to the original estimate of an annualized 0.6 percent.

The final takeaway from the report: During 2009 (that is, measured from the fourth quarter of 2008 to the fourth quarter 2009), real GDP increased 0.1 percent.

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The housing market continues to bounce along a rocky bottom.

The Mortgage Bankers Association reported today that mortgage applications for new, single-family home purchases for the week of Feb 18 continue a downward trend, falling sharply by 7.3 percent to its lowest level since 1997. The refinance index fell by 8.9 percent.

New home sales for January showed an even steeper drop, losing 11.2 percent from the December sales figure and 6.1 percent from January 2009. Inventory of homes for sale reversed an 8-month trend in January, increasing inventory levels to 9.1-months supply. And median prices fell another 5.6 percent to $203,500.

An increase in the number of new homes entering the market and falling consumer confidence levels contributed to the weak numbers. Realtors expect demand to pick up as the deadline for homebuyer tax credits looms closer this April, much like the increase in buying activity last November before the tax credit program for new homebuyers was extended.

What are your thoughts on developments in the real estate markets? Share your comments below or click here to join the discussion in our new Forum.

The latest data from the Conference Board jolted markets today as the Nasdaq and Dow fell by about 1 percent after the news.

Consumer confidence fell by a significant 10 points in February to 46.0; January’s reading came in at a revised 56.5. The expectations index fell more than 13 points to 63.8 and the present situation index fell nearly 6 points to 19.4.

What’s to blame for the surprising numbers? Pick a card: income, employment, business conditions. Or maybe we should look at the Washington zeitgeist these days, which may trump all.

The one bright spot remaining is consumer spending, which indicates that no matter how pissed off people are, they still need stuff.

The new Case-Shiller U.S. National Home Price Index numbers show what happens when a skydiver pulls the rip cord:

Q1 2009 = -19%, Q2 2009 = -15%, Q3 2009 = -8.7% and Q4 2009 = -2.5% (YoY)

S&P/Case-Shiller Composite 10: Nov = 158.49  Dec = 158.18
S&P/Case-Shiller Composite 20: Nov = 146.28   Dec = 145.90

This monthly data includes prices for 20 individual cities, and two composite indices (10 cities and 20 cities).

Granted the data measures price changes for single family homes in December, a particularly sluggish month all-around. But it’s been nearly a year since the Home Affordable Modification Program (HAMP) was launched (March 2009) to help struggling homeowners modify their loans.

And despite slowing price declines for 2009 and falling delinquency rates, some economists predict that with ever-growing inventories of foreclosed properties and the new category of “redefaults,” the housing market will continue to eat its young.
According to a recent S& P report, the “shadow inventory” of delinquent loans and REO (bank-owned) properties are likely to keep housing prices constrained for some time, perhaps up to three years:

“S&P estimates the inventory to equal a 33-month supply of homes. Analysts added the estimate is actually conservative, as they did not assume homes not showing signs of distress would default and push the overhang of supply even further.

According to the S&P report, homes are falling into serious delinquency faster than REO transactions are closing. The total balance of seriously delinquent loans reached well over $400bn through November 2009, while the balance of REO properties reached its peak in September 2008 and declined to $50bn. On average, $14.5bn of seriously delinquent loans or REO property liquidates each month. According to the report, it will take 29 months to clear this supply of homes…”

Here are the charts from S&P:

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