November will be better, but the past year's flat trend in the core deficit seems to be breaking. |
Now the question is whether sales can hold up in the face of lower consumer confidence, |
On the face of it these are very Fed-friendly numbers. |
Once rebuilding gets underway in earnest in the Gulf Coast, we expect much stronger construction numbers across the board. But that will be a story for the very end of this year and into 2006. |
One steep drop in housing starts does not make a downward trend, especially in a month which was very wet in the West and very cold in the Northeast. Still, the data are consistent with other signs of a softening housing market, most notably the drop in homebuilders' confidence. What really matters, though, is whether sales will fall fast enough to turn a softening into a collapse. |
Only a few years ago, auto sales numbers like those seen recently would have automatically lead to expectations of higher prices, ... Now, increasing transparency in car prices, substantially due to the Internet, together with the automakers' ability to hold down unit labor costs, means that stronger sales do not necessarily lead to higher prices. |
Only a few years ago, auto sales numbers like those seen recently would have automatically lead to expectations of higher prices. Now, increasing transparency in car prices, substantially due to the Internet, together with the automakers' ability to hold down unit labor costs, means that stronger sales do not necessarily lead to higher prices. |
Only a few years ago, auto sales numbers, like those seen recently, would have automatically lead to expectations of higher prices, ... Now, increasing transparency in car prices, substantially due to the Internet, together with the automakers' ability to hold down unit labor costs, means that stronger sales do not necessarily lead to higher prices. |
Our forecast was undone by two factors. The impact of the post-Katrina spike in oil prices is lingering; it will eventually fade. Second, trade in goods ex-oil and aircraft -- core -- deteriorated again. |
Our guess now is that there will be some incremental decay of consumers' expectations, especially in the New York area, but it will not be sufficient to upset our basic recovery story, |
Our measure of core sales, which excludes autos, gas and food, rose a pitiful 0.1 percent, the worst performance since April and impossible to square with Mr. Greenspan's assertion last week that the economy is regaining traction, |
Our measure of core sales, which excludes autos, gas and food, rose a pitiful 0.1 percent, the worst performance since April and impossible to square with Mr. Greenspan's assertion last week that the economy is regaining traction. |
Our view is that home sales will slide through the summer, dragging housing starts down into the fall. But this is still no more than a forecast; mortgage applications are still very strong. |
Output will not immediately accelerate to the pace suggested by the orders numbers ... because companies are still aggressively running down inventory. |
Over the next few months we expect starts to strengthen as reconstruction begins on the Gulf Coast - the rise in permits may be an early sign - but elsewhere starts still need to lag sales. Demand is still huge but there are too many new homes for sale. |