Economic data

In likely a result of a rush to buy a home in order to qualify for the possible expiration of the home buying tax credit, Sept Pending Home Sales, a measure of contract signings of existing homes, rose 6.1%, well above expectations of a flat reading m/o/m. The gain was led by the high foreclosure region of the West, followed by the Midwest and South. Contract signings fell in the Northeast. In the aggregate, Sept is the last month to sign a contract to buy an existing home with hopes to close by Nov 30th in order to qualify for the $8,000 tax credit. October will likely see a hangover but with the likely extension of the credit, things may pick up again but it will happen during a seasonally slower time of the year for transactions. At some point (maybe), the tax credit will end for good and the housing industry will go back to natural demand and supply dynamics and it will be only then will we know the real status of the industry.

The Oct ISM manufacturing # was a better than expected 55.7, 2.7 pts above forecasts and up from 52.6 in Sept. It’s at the highest level since Apr ’06 but the ISM is a measure of the direction of improvement, not the degree so don’t extrapolate that we’re partying like its Apr ’06 but we are certainly better off than Apr ’09. New Orders fell more than 2 pts and Backlogs were flat but Production (following previous gains in Orders) rose to the highest since July ’04 and Inventories at the manufacturing level rose to the highest since Aug ’08. The inventory build is the basis for the rebound in the economy and manufacturing will lead the way. Customer inventories though were down a touch. The Employment index was a key positive as it rose almost 7 pts to 53.1, the 1st time above 50 since July ’08 and its the highest since Apr ’06 helped out by “some callbacks and opportunities for temp workers”. Export Orders were up a touch but at the most since Aug ’08.

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