Economic data

Feb Chicago PMI was a better than expected 62.6 up from 61.5 in Jan and vs the consensus of 59.7. It is now at the highest level since Apr ’05 but measures the direction of improvement, not the degree. The components though were mixed. New Orders fell 4.2 pts but still remain above 60 for a 5th straight month at 62.2. Also, inventories fell 6.3 pts to 42.4 but is still the 2nd highest reading since late ’08. Employment fell almost 7 pts to 53 but is above the key 50 level for a 2nd straight month for the 1st time since Aug/Sept ’07. Backlogs rose 4.2 pts to 58.5 to the highest since Dec ’07 and is above 50 for a 3rd month. Prices Paid rose 1.5 pts to 67.7, the most since Sept ’08. Bottom line, the data confirms that mfr’g remains the source of our incipient recovery. While some key components fell from Jan, they jumped from Dec. The Q4 GDP report revealed how much inventories were an influence and today’s # shows that it will continue into Q1.

Following the very weak Conference Board Consumer Confidence figure on Tuesday and the 4 month low in the ABC confidence poll, the final Feb U of Michigan confidence figure was little changed (73.6) with the preliminary (73.7) but was a touch below expectations of 73.9 and down from 74.4 in Jan. From Jan, Current Conditions rose by .7 pts but the future Outlook fell by 1.7 pts. One year Inflation expectations are at 2.7%, down .1% from Jan. From the initial report of a few weeks ago and which makes up 60% of the final #, Current Conditions fell by 2.3 pts, partially offset by a 1.5 pts gain in the Outlook. Bottom line with all these confidence figures, they are all greatly influenced by the labor market and how one feels doesn’t necessarily lead to action and its why these data points are more anecdotal in nature and historically not market moving.

Existing Home Sales totaled 5.05mm annualized which was 450k below expectations and down from 5.44mm in Dec. It’s at the lowest level since June and follows the recent downward trend in the purchase index (now at lowest since 1997) of the weekly MBA data and Wednesday’s record low New Home Sales data. Both single family and condos/co-ops saw a fall and in every region. Months supply rose to 7.8 from 7.2 and to a 4 month high but was solely led by a rise in single family inventories. Condos/co-ops saw months supply fall to 9 from 9.4. The absolute # of homes available for sale fell to 3.265mm, the lowest since Mar ’06. The median price was flat y/o/y at $164,700 but matches the lowest level since May ’02. Bottom line, lower prices, $1T of MBS purchases and a home buying tax credit are not enough to offset the lack of confidence and tough labor market in generating sustainable sales growth.

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