Muddy Data Suggest Economy Growing Modestly Through Q4
- October New Orders for Durable Goods were unchanged, after gyrating in August and September.
- The Conference Board’s Consumer Confidence Index increased in November, up to 73.7.
- The Case-Shiller 20-City Composite House Price Index for September gained 0.3 percent.
- The Dallas Fed’s Texas Manufacturing Production Index showed a small output increase for November.
- The Richmond Fed’s Survey of Manufacturing Activity showed a moderate pick-up in November.
The data stream is muddy from the effects of Hurricane Sandy, changing patterns of holiday shopping and the approach of the Fiscal Cliff. The effects of Hurricane Sandy can be seen in retail sales, labor market and housing market data from late October through November. The ongoing shift toward online shopping plus the relentless expansion of the Black Friday shopping season within a season is further skewing retail sales data. The Fiscal Cliff has businesses justifiably concerned, consumers less so, and business fixed investment has been weak. Add in recession in the Eurozone and concern about slower growth in Asia and it makes for subdued, rather than great, expectations for U.S. growth in the fourth quarter. Positive revisions to Q3 real GDP growth are expected to result in about a 2.5 percent growth rate for the quarter. The current fourth quarter will likely show slower growth, closer to 1.5 percent, not a lot of momentum heading into 2013.
New orders for durable goods were unchanged in November, after gyrating through August and September. August was down 13.1 percent and September gained back 9.2 percent, swung by commercial aircraft orders. Many analysts are spinning the November number in a positive direction, but let’s leave it where it is, flat, with no spin. We simply need more data to see if business investment is stabilizing after a weak third quarter. The Conference Board’s Consumer Confidence Index increased moderately to 73.7 in November as the consumer expectations component increased. There does appear to be a disconnect between improving consumer expectations and the approaching Fiscal Cliff, highlighting the risk to ongoing gains in consumer spending through the first half of 2013. House prices continue to firm up. The Case-Shiller 20-city index was up 0.3 percent for the month of September, and up 3.0 percent from a year ago. Some of the gain is due to a declining share of distressed homes on the market. Texas manufacturing conditions remain positive, as do conditions from Maryland through South Carolina.
Market Reaction: Equity markets are down. Treasury yields are down at the long end of the yield curve. NYMEX crude oil is down to $87.15/barrel. The dollar is up against the yen and the euro.
Click here for a PDF version of the Comerica Economic Alert: Durable Goods 112712.