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Tuesday, May 19, 2015

But Winter Must End!!!

Okay, not in Ice Ages, but currently we are in one of the balmy interludes, although I can concede that Bostonians may have wondered about that earlier this year.

New Residential Construction takes a really strong pop in April. Very nice. Very strong. In both permits and starts.

The economy may not be that strong, but it is getting its legs under it.   

The Puzzle of Weak First-Quarter GDP Growth

Glenn D. Rudebusch, Daniel Wilson, and Tim Mahedy

The official estimate of real GDP growth for the first three months of 2015 was shockingly weak. However, such estimates in the past appear to have understated first-quarter growth fairly consistently, even though they are adjusted to try to account for seasonal patterns. Applying a second round of seasonal adjustment corrects this residual seasonality. After this correction, aggregate output grew much faster in the first quarter than reported.


I read it - I think it's substantially wrong.

According to freight, first quarter was very weak. Freight not seasonally adjusted.

You can usually look at raw data to get a feel for things.

On the other hand, a few bad winters will accumulate to affect SA, most often done on a five-year scale, and then we'll get a mild one and GDP will look great.
Thank you

nIf a second seasonal adjustment doesn't work out to what is desired then they can do a third.

Naivety rules. They are keeping down the growth so they can adjust it back up before the presidential election so they can say, "See? Democrat policies are great for the economy."

The leftist deep state is at work.

If housing is so great why is the price of lumber going round the bowl and down the hole? Usually when demand is increasing price increases also. It will be interesting to see if it gets revised down next month so they can report another increase.
Learner2 - Housing is really okay. I look at the error bars in this report, and the seasonal and the raw. It really is okay. It will do an up down thing in part because of the seasonal distortions, but the YOY is excellent and it is going to hold above last year by no slim margin. Authorizations are up 8.1% YTD with a standard error of 1.1%.

Authorized but not yet started are up 139/114 YoY. No SA. There's a lot in the pipeline, and the cost drop helps builders quite a bit. Under constructions are strongly above last year. 853/742 - that is an NSA number.

It is impossible for housing to become a drag on the US economy until very late this year, when it would have very little effect.

We had another wretched winter for a big part of the country. It held back construction.

BEFORE this housing report I thought housing would be okay this summer for two reasons:
1) I was watching sales patterns of smaller houses that came on the market in a few areas. As soon as the snow/ice melted they were snapped up.
2) The FHA premium cut makes it more affordable (but only for moderately priced housing). Rents are high and total housing payments with these interest rates are pretty good for smaller houses, but many persons/couples who would be very well qualified for first time purchases based on rental payment history didn't have the accumulated downpayment, and lenders often need to offset recession risk for them. FHA does that.

Regarding lumber, the stronger dollar and more moderate fuel prices have something to do with it, as well as decent stocking before.

A lot of US lumber comes from Canada, and currently the Canadian dollar is trading at about 82 cents USD - so you will see lumber prices moderate regardless of any other factor. The Canadian dollar is influenced by many factors, but the big drop in oil prices last year had its effect.

Looking at rail/forest products, as the price dropped earlier this year there was a surge in lumber shipments. That cleared out and then lumber picked up again at about week 13 to run around last year's pace.

Finally, I always watch truck sales in the spring, because when construction is okay there will be good truck sales, and that indicator is green this year.
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