Economic data

Oct Pending Home Sales rose 3.7% m/o/m vs an expected fall of 1%. Gains were led by a 19.9% jump in the Northeast, an 11.6% rise in the Midwest and a 5.4% lift in the South. The West saw contract signings down 11.2%. The overall y/o/y gain is 28.6% as the comparisons begin to get very easy. At the time of these contract signings the belief was the home buying tax credit was set to expire on Nov 30th so a sense of urgency likely lifted the data. With the credit now extended but during a seasonally slow time for sales, we’ll get to see how many sales were pulled forward. Talking its book and ever the optimist, the NAR chief economist said “we should reach self-sustaining housing conditions and firming home prices in most areas around the middle of ’10.” With ever rising foreclosures now spreading to prime borrowers and option ARM resets the next shoe to drop, the employment picture in ’10 will determine the accuracy of his opinion.

The Nov ISM manufacturing # was 53.6 vs the estimate of 55 and down from 55.7 in Oct but is still the 2nd highest reading dating back to May ’06 and is above 50 for 4 straight months. The components were mixed as New Orders rose almost 2 pts to 60.3 but Backlogs fell 1.5 pts to 52. Production, which follows New Orders, fell 3.4 pts to 59.9. Manufacturers Inventories fell 5.6 pts to 41.3, the lowest since Aug and Customer Inventories fell 1.5 pts to 37, the lowest since May ’04 with both data points still showing no sign that inventory destocking is leading to restocking. Employment fell 2.3 pts to 50.8 but remains above 50 for a 2nd month. Export Orders rose a touch to 56, the highest since Aug ’08. Prices Paid fell 10 pts to the lowest since July. The ISM sums up the data with “the recovery in manufacturing is continuing (with 12 of 18 manufacturing industries reporting growth), but many are still struggling based on their comments.” The industries of food, beverage & tobacco products and apparel, leather & allied products all cited concerns with the weakening US$ as it raises import prices of raw materials.

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