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Tuesday, March 06, 2007

Still Stalling

Or at least, stall speed is what I make of this round of news. Non-official stats I consider important were Barnes & Noble's disappointing sales and the A&P/Pathmark purchase. Both of those seem to indicate retail weakness in the NE and among a higher demographic than the bottom 20%. Both are consistent with the weakness in retail sales we've been seeing.

Official stats:
Mfr's Shipments, Inventories & Orders (preliminary for Jan):
New orders decreased 5.6%
Shipments decreased 1.2% (this had been increasing for three months)
Unfilled orders increased 0.1% (had been increasing for six months)
Inventories finally decreased 0.2%, but inventories to shipments ratio increased to 1.23%
New orders for durable goods dropped 8.7%
New orders for nondurable goods dropped 2.0%
Take this on top of advance January retail sales, which came in flat from December, and considering YoY data and price increases, either flat or below January 2006. Nominal increase was 2.3% YoY. The advance retail sales for February should be released on the 13th and I am anxiously awaiting that.

Pending home sales (pdf) for January were discouraging. I take seasonally adjusted figures with a big grain of salt, but according to NAR's seasonally adjusted figures pendings were down from December. The non-adjusted figures showed an 8% drop from January 2006, and they were negative YoY in all four regions. Pending sales are recorded when a sales contract is signed and before a mortgage application is filed on the property, so it is likely that the changes in underwriting standards will allow a lower percentage of these pending sales to go through than last year. It is absolutely impossible to interpret these figures as signs of a stabilizing housing market.

It is really no surprise, but 4th quarter productivity was revised down to 1.6%, raising concerns about inflation pressures.

Wages may be rising, but we have yet to manage to claw ourselves out of the negative savings rate syndrome shown in personal income. How long can this last? Consumer credit is due this afternoon at 3:00, and that's one I'll be looking at carefully.

The bright spot is still the ISM Manufacturing report released March 1st, which managed to come in at 52.3, a figure which indicates manufacturing expansion. It showed new orders increasing nicely, so perhaps January's slump is exceptional and will be largely reversed when the February report comes in.

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