U.S. ECONOMIC TRENDS: Recap 2/27-3/2, Preview March 5-9

Rundown of trends in U.S. economic data.

Next up is WeeklyBasis, rate market outlook in plain English.

RECAP FEBRUARY 27 – MARCH 2 STATS/TRENDS

Home Prices Bottom Again, But Does Data Matter To Your Town?: December’s Case Shiller report that showed home prices across 20 ‘cities’ were down 1.1% in December and down 4% year-over-year through December. From June/July 2006 peak through December 2011, the price decline is -33.8%, a new record low. But this data isn’t relevant for local decisions.

Pending Home Sales Near 2yr High. Existing Sales Up Too: January’s pending home sales index from NAR was 97.0, a 2% gain and a near two-year high. This measures new contracts on existing homes expected to close within 60 days, so it’s forward looking, then actual closed sales are measured by NAR’s existing home sales which were up 4.3% in January to 4,570,00 (annualized), and inventory was at 7yr lows. The median price of an existing home fell 4.6% to $154,700. Here’s a good Pending & Existing home sales chart.

GDP Revised Up, But For Wrong Reasons: The second of three GDP readings for 4Q2011 was revised from 2.8% to 3%. But two-thirds of new figure was wholesale inventory growth that will be given back if consumer spending doesn’t keep pace. GDP Charts.

Manufacturing Streak Steady But Growth Slowing: The Institute for Supply Management index of manufacturing activity was 52.4 for February, down from January’s 54.1, and 50 is dividing line between expansion and contraction. This could indicate supply side slowing to adjust for weak demand in Dec & Jan. February was the 31st straight month of (albeit modest) expansion (TABLE).

Personal Income Down, Spending Flat: January’s personal income was 0.3% month/month and 3.6% year/year. Consumer spending was 0.2% month/month and 3.8% year/year. In fact, real (inflation adjusted) income dropped and real spending has been flat for 3 months.

Fed’s Preferred Consumer Inflation Gauge Remains Flat: The Personal Consumption Expenditures Index (PCE) is how the Fed prefers to view inflation, and it continued to be flat in January: monthly PCE was 0.2% total and 0.2% ex-Food/Energy. Annual PCE was 2.4% total and 1.9% ex-Food/Energy. The Fed especially focuses on those monthly/annual figures that exclude food and energy because they think these items have too much short-term volatility.

Lowest Jobless Claims since March 2008: For the week ended February 24, claims for unemployment insurance fell 2k to 353k, holding for a third week at the lowest levels since March 2008. This has brought down the 4-week moving average to 354,000. Good trend but this report doesn’t count the number of new jobs created. We’ll get latest on job creations next week, previewed below.

PREVIEW MARCH 5-9 STATS/TRENDS

Next week’s economic calendar is mostly focused on jobs. Highlights below with rate impacts.

Positive Outlook For Services Industries: This is a different Institute for Supply Management survey than noted above. This one measures services industry (rather than manufacturing) activity in areas like Real Estate, Transportation & Warehousing, Hotel/Restaurant, Construction, Entertainment & Recreation, Utilities, etc. It’s also on a long up-trend: January’s index reading of 56.8 was the 25th increasing month—50 is dividing link between expansion and contraction. February’s report Monday calls for a reading of 57. This report is rate neutral.

ADP Jobs Report: ADP is a private payroll provider that processes payrolls for about 23 million employees throughout the U.S. Their jobs report comes out a couple days before the official Bureau of Labor Statistics jobs report each month. January ADP showed +170,000 new private jobs, much lower than the blowout +325,000 from December. Estimates for February’s report this Wednesday call for 220k-250k new private jobs. Rates up if it’s at or above this range.

Jobless Claims: The decreasing jobless claims trend (see last week’s recap above) is expected to continue this week. Slight upward rate risk, but since this report doesn’t count jobs added, it’s not as influential on rate markets short-term.

BLS Jobs Report: The Bureau of Labor Statistics (BLS) jobs report each month is what markets really react to more so than ADP. January BLS showed +243k nonfarm jobs created, the most since April 2011, and also the unemployment rate dropped from 8.5% to 8.3%, the lowest since February 2009. Estimates for February’s report this Friday call for 207k-250k. If it’s at the high-end of estimates, rates will rise—maybe sharply if no other

RATE OUTLOOK

Don’t miss WeeklyBasis, short and sweet outlook on next week’s rate and stock markets.

And catch up on top on the web’s best mortgage/housing stories last week.