Despite the weather improving in March, pending sales of
existing homes decreased at a seasonally adjusted annual rate of 4.9%; Sales were
down 10.5% from one year ago. Economists were looking for a 0.4% increase.
While some people ignorantly insist Housing is having zero impact on the economy, I am heartened to see the business press isn’t buying into that nonsense. Bloomberg’s Caroline Baum not only punctures that absurdity, but assigns a political explanation for it as well:
"Excluding housing, the U.S. economy is doing just fine.
That’s the latest rationalization of a select group of operators who think that the Bush administration’s 4.6 percentage point cut in the top marginal tax rate and 5-point reduction in the top capital gains rate can protect the economy from any and all ills.
To say that ex-housing the economy is doing just fine is tantamount to claiming that, ex-Iraq, Bush’s Middle-East policy is a rousing success."
Caroline pulls no punches. I am partial to analogy used by Deutche Bank’s Joe Lavorgna. We’ve been discussing how utterly untethered from reality that analytical approach is, and Joe observed:
"Backing out Housing today is like going ex-Capex in the late 1990s. Corporate Capital Spending was huge in the the nineties, and if we remove its contribution from GDP from 2000 forward, well, then there was no recession in 2001-02."
Let’s do a quick review of our favorite Ex’s:
• Back the things going up in price, there’s no inflation (Inflation ex inflation)
• Remove Housing from GP, there’s no economic deceleration (GDP ex Housing)
• Elimate the CapEx spending from the tech boom, and therewas no 2001 recession (GDP ex Capex)
Did I forget any? Feel free to use comments to suggest other analytical absurdities . . .
Housing? What Housing? I Don’t See Any Housing
Bloomberg, April 30, 2007