1. On Monday, we learned home prices increased 5.8% last year, with 0.8% coming in December. The Pacific Northwest led the way. On Wednesday, we learned New Home Sales rose very modestly in January, showing increased cancellations due to rising mortgage rates. Still, New Home Sales in 2016 beat the prior year by a healthy 12%. On Thursday, we learned that Pending Home Sales actually decreased in January. This is a leading indicator that is constrained by the low inventory of homes for sale nationwide, higher mortgage rates, and a 9.8% decrease in the West, primarily due to weather. Bottom Line: The residential market is just fine.
2. Construction outlays during winter should normally be ignored, as they are just too volatile. Such spending still increased in January but barely. The three-month moving average is still 4.4% better year-over-year. Bottom Line: While both residential and commercial construction look fine, the weakness is in the public sector — nothing that a major infrastructure redevelopment wouldn’t fix!
3. Both the ISM Manufacturing Index and the ISM Non-Manufacturing Index improved. This suggests both the manufacturing sector of the economy, as well as the services sector, are doing well. Despite NAFTA, manufacturing employment is increasing. Since inventory levels of manufactured goods are so low, continued job growth should be expected. Most interesting, despite a stronger dollar, manufacturing exports are increasing. Bottom Line: Things are fine.
4. Personal income growth and spending growth started the year nicely with 0.4% and 0.2% in January respectively, but looked somewhat anemic with inflation approaching 2% . . . finally. Also in January, we saw Durable Goods Order improve, primarily due to the always- volatile increase in airplane orders. In February, consumer confidence improved nicely, which should support increased consumer spending. In a consumer-based economy like the United States, this is all good news. Bottom Line: Things are fine.
Does the economy look steady? Yes.
Does this mean the stock market cannot go down? No!
Am I worried about either right now? No.