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RAPID RESPONSE Comments (Normally available by subscription)...

HERE ARE A FEW ECONOMIC NEWS ITEMS ABOUT WHICH I RECENTLY COMMENTED.

Here’s my quick take re durable goods orders for November (12/24/09).

1. The numbers. Durable goods orders for November edged 0.2% higher (sequentially) while shipments climbed 0.3%. More: unfilled orders shrunk 0.7% and inventories contracted 0.2%.

2. Read beneath the headlines! As is often is the case in these figures, lumpy and costly commercial aircraft orders pushed around the totals. They increased 39.3% in October and saw a 32.6% pullback in November. These orders, while very important to America’s manufacturing base and exports, reflect the long range expectations of buyers, not current economic conditions. So if we look at orders ex transportation equipment, we get a more finely tuned read of the current economic situation. That number: +2.0%. That’s the point: this is a good report for near-term business prospects.

3. Lots of solid gains. Primary metal orders (a leading industry) = +1.4% (after prior months of big gains); fabricated metal products orders = +1.0%; machinery orders = +3.5% (a turnaround?); computer/electronic product orders = +3.7%; and electrical equipment/appliances orders = +3.2%. This recovery is looking pretty broad based.

4. Is it safe, yet? Yes. Embattled factories are emerging from their fox holes and putting in orders to stem the disappearance of inventories and meet new demands. Manufacturers suffered a lion’s share of the recession pain, and now, stand ready to become a major part of the recovery story.

5. Bye, bye. And inventories are still being worked down! This is a clear sign that production needs to be increased.

6. CapEx off the R/x? Nondefense capital goods orders dropped 1.9%, but that included the nosedive of commercial aircraft orders. Take these out of the picture and you find these investment orders up a robust 2.9%. Capital spending is making a comeback.

7. Prediction for 2010. I know that manufacturers were forced to skinny down in 2009 as a matter of survival, and now swear they will not ramp up payrolls. But they will. Payrolls were cut too deeply over the last year, and hence, there will be a need to rehire to some degree. We will see factory job increases at some point in 2010.

8. Bonus. The all-important weekly initial claims for unemployment compensation receded 28k, to 452k, for the week ending 12/19. The 4-week moving average dropped 3k, to 465k. This insightful labor market indicator continues to work lower, consistent with ongoing improvement in the economy. Payroll growth turned decidedly positive: in mid-2003, when initial claims fell to about 400k; in early-1992, when initial claims fell to about 440k; and in early-1983, when initial claims fell to just above 500k. So we are now in an area that would be consistent with job increases.

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Here’s my quick take re PI an PCE for November 2009 (12/23/09):

1. The numbers. Personal income for November grew 0.4% (sequentially). Real disposable income advanced 0.2%. Personal consumption expenditures (PCE) expanded 0.5% in nominal terms or 0.2% in inflation-adjusted terms. The PCE Price Index increased 0.2%, but core prices went unchanged. The October personal income and disposable income figures, in nominal terms, were revised 0.1% higher.

2. This is no recession. Income is growing. Consumer spending is growing. Message to NBER: make the call!

3. This ain’t heaven, either. If you do the arithmetic, November, inflation-adjusted consumer spending stood 1.6% (AR) above the Q3 average. This is a very modest showing. In a similar calculation, real disposable income in November was 2.3% (AR) above its Q3 average—hardly a barn-burner figure. [Grammarians: I know “ain’t” is not a word; I used it purely for an effect.]

4. What will make it better? Job growth. And we are working our way there. Payrolls were virtually flat in November (and employment was up 227k by the Household Survey count), the best show in many a moon. The income implication of this is that “wage and salary disbursements” in November, up $17.8B, saw its best month since April. As the labor market mends, job increases will produce income gains that will sustain a higher level of consumer spending growth.

5. Profits galore. Small business and farm profits for November registered solid gains.

6. Coming up a bit short. The personal saving rate for November increased a hair, to 4.72%. Consumers appear to be comfortable with a saving rate at this level. (Actually, as the economy improves, this rate is apt to drop a bit.) At this rate, the household sector is generating $525B of personal saving. But the federal deficit this year will exceed a trillion dollars. If ALL of personal savings were tapped to fund the deficit, there would still be a huge shortfall. Where will the rest come from???

7. Memo to Fed: keep an eye on this. The 12-month PCE inflation rate was -0.9% in July, but in November it was +1.5%. (For core-PCE inflation, the numbers are +1.3% for July and +1.4% for November.) In December, the PCE inflation rate will be over 2%. Are you telling us you are OK with this? Is this a pattern that is consistent with your outlook: “With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.” [FOMC Press Release, 12/16/09.]

8. Stop the presses! New home sales plunged 11.3% in November, to 355k units (AR). This stands in contrast to the 7.4% increase in existing home sales for November, announced yesterday.

9. Not all percentage changes are the same! The 11.3% decline in new home sales amounted to 45k units, at an annualized rate. The 7.4% increase of existing home sales in November amounted to 450k (AR) more unit sales. So net, net, total sales increased significantly in November.
10. What’s going on? About one-third of existing home sales are forced or distressed sales associated with foreclosures. There are some tremendous bargains to be had—price-wise! This is generating tough competition for new homes sales (and construction), where the ability to cut prices is much more limited. More arithmetic: the sales of foreclosed properties (one-third of existing home sales) is still running short of the monthly number of foreclosures. Hence, the pool of foreclosed properties is still swelling. So this foreclosure factor will be a persistent constraint on new home sales (and construction) for some time to come.

11. Even so… The inventory of unsold new homes continued to fall in November.

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Here’s my quick take re FOMC for 12/16/09:

1. What they did. Again, nothing. (What this means is that the fed funds rate will trade 0 – 25 bp, and there was no call to alter the discount rate, which remains at 50 bp.) The vote was unanimous.

2. The Fed’s econ assessment. “Economic activity continued to pick up…” and “the deterioration of the labor market is abating...” and “The housing sector has shown some signs of improvement over recent months.”

3. Wishful thinking? “With substantial resource slack… the Committee expects that inflation will remain subdued for some time.” So why have commodities prices sharply increased? And why have PPI plus CPI inflation accelerated?

4. Time’s running out. The Fed has been on a buying spree for MBS and agency securities. But it says, “…the Committee is gradually slowing the pace of these purchases.” This support to the Market, helping keep interest rates row, will end by the end of 2010:Q1. How big an effect have these purchases been? The Fed will buy about $1.5T. The total U.S. money supply as measured by M1 (cash and checkable deposits), which took us 200+ years to get here, is just under $1.7T.

5. Operative statement. The FOMC believes the economic climate will “warrant exceptionally low levels of the fed funds rate for an extended period.” So don’t expect a rate increase at the end of January, either.

6. Overview. Historically, the Fed has not begun any snugging of interest rates before the unemployment rate starts to fall. We are clearly not at that point yet. But short-term interest rates have been brought to an emergency level of almost zero; that’s unprecedented in modern times. So raising the Fed funds rate to 1%, 2%, or even 3% would be just eliminating the emergency level of interest rates and returning to an accommodative level. And doubling in very short order the size of the Fed’s balance sheet is an experiment that has never been run before here in the U.S. Well, as my high school chemistry teacher sadly learned, experiments sometimes blow up in your face.

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Here’s my quick take re the CPI and Housing Starts for November 2009 (12/16/09):

1. The numbers, part 1. Housing starts rebounded 8.9% after a similar relapse last month. This brought the pace of starts to a 574k annualized rate. Building permits also recovered 6.0%, to a 584k rate.

2. First steps. New home building did better in November across a broad front. Single-family starts were up (+2.1%). Multi-family starts were up (+62.7%). Starts were higher in every Census region. And permits were both up and greater than starts, a hint that there will be further future gains in starts. But in fact, these are only baby steps in what will be a long, long journey back to industry health. But you have to start somewhere.

3. Not yet boom-times. While the change in housing’s direction is welcomed, the actual change in activity levels is tiny, and hence, barely able to move the needle on related spending items, such as furniture, appliances, and furnishings.

4. The numbers, part 2. The Consumer Price Index (CPI) for November increased 0.4% (y/y = +1.8%). Core consumer prices were unchanged (y/y = +1.7%).

5. CPI like PPI. Just like the Finished Goods PPI has swung widely from a major decline to a moderate increase, the CPI is following suit. The CPI was down 2% y/y in June. Now it is up 1.8%. Write this down: in December it will be 2.6% or more. By May of next year it will probably be up 3% or more. If there is so slack in this economy, why is inflation accelerating??? Maybe some other factor is at work? Could it be excess money/liquidity?

6. Special recession pricing? Yeah. New vehicle prices are up 1.6% in October, another 0.6% in November, and +4.9% y/y. It looks to me like government intervention in the auto industry has imposed a stealth tax on the American public. Why is not the public enjoying a share of the benefits of all the cost-cutting that has occurred???

7. Get the message! November food at home prices = 0%; food away from home = +0.2%; alcoholic beverages = +0.4%; and nonalcoholic beverages = -0.3%. Hence, stay at home and drink a Coke. Oh, something else: November tobacco prices = +1.0% (y/y = 30.3%). Give it up!

8. A phantom price. Owners’ equivalent rent—what we would presumably pay ourselves to live in our own home—fell 0.1%. Of course, we don’t do this, but since this gets a 24% weight in the CPI market basket, this is a phantom price biasing the headline inflation rate below the prices we actually do pay and the inflation rate we actually suffer.

9. When hot is cool. November apparel prices = -0.3%. Warm November weather led to some sluggish sales of winter attire, leading to extra discounting.

10. A curiosity: the bigger the city, the lower the inflation (for the last year). Pop > 1.5M = +1.6%; 50k < pop <1.5M = +2.1%; and pop < 50k = +2.3%.

11. Get it while you can. Medical care prices = +0.3% for November and 3.5% y/y. Will these pressures worsen? Is there a rush to get price increases in before Obamacare?

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Here’s my take re industrial production for November 2009 (12/15/09):

1. The numbers. Industrial production regained some steam in November, expanding 0.8%. (It was unchanged in October.) The latest increase left total production down 5.1%versus the same time last year, but in June, production was off 13.2% y/y. Manufacturing output jumped 1.1% in November. Capacity utilization for all industry grew 0.7 points, to 71.3%; factory operating rate was 68.4%, up 0.8 points.

2. You heard the amount, now the count. Output was up in 15 of 19 industries, plus mining. Utility output fell 1.8%, but that was because November was a warm month, which left a bit more jingle in consumers’ pockets.

3. Autos cruising. Light vehicle production was at 7.06 million unit pace, up 3.4%. Domestic car demand in November (at 3.82 mu, AR) was greater that production (at 2.74 mu, AR). It will be an uphill climb for the auto industry, but it looks like the build rate of cars can still safely increase a bit.

4. Now that’s what I am talking about! Oil and gas well drilling activity advanced 7.7% higher. The short-term answer to energy price pressures is drill, drill, drill (in America)!

5. Not convinced? Business is being super-cautious about getting back to investing in capital equipment. November real production on equipment in inflation-adjusted dollars stood 3.4% above its Q3 level. That’s a positive tilt for Q4, but it is not a rousing endorsement of this economy.

6. High tech acting like low tech. America’s most dynamic industry—the industry with the greatest growth potential—is its high technology industries. Production in these industries edged only 0.4% higher in November. The composition: computers = -2.6%, communications equipment = +0.5%, and semiconductors/related components = +1.8%. Only the semiconductor piece of high tech is acting like the high tech of old.

7. More to come? Yes! Amazingly, industrial production in this recession dropped below the low point during the 2001 recession! But demands (as reflected by GDP) did not decline anywhere near as far. We made up the difference between production and demands by living off inventories (i.e., drawing them down). So just to stop further declines in inventories, production levels need to be brought higher. Then there will be some desired inventory replacements, which is additionally accretive to industrial production, and finally, the demands themselves will grow (= “recovery”), which requires further expanding industrial output.

8. Time to reconsider? Since June, industrial production is up at about a 9% annual rate. Since May, retail sales are up at a 7% AR. But also since May, the PPI for Finished Goods is up 8% (AR). As the FOMC meets today and tomorrow, should not the Fed consider pulling back from emergency (near zero) levels of interest rates. The economy is getting some traction, but price pressures are getting entrenched, too, in a way not predicted by or consistent with the output gap (slack) model of inflation.

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Here’s my quick take re the PPI for November 2009 (12/15/09):

1. The numbers, part 1. The PPI for Finished Goods soared 1.8% higher. Excluding food and energy items (“core”), Finished Goods prices swelled 0.5%, the largest increase in more than one year.

2. More results. Intermediate Goods PPI prices rose 1.4% (core = +0.3%); Crude Goods PPI prices jumped 5.7% (core = -0.8%).

3. A stunning reversal! Amidst and in spite of huge degrees of slack in the labor and industrial markets, the inflation situation has seen a remarkable transition. The y/y %ch for the PPI for Finished Goods has swung from -6.9% in July to +2.4% in November. The acceleration of prices pressures will not end here; by March of 2010, this inflation rate could be 2 ½% - 3% higher. It is as if the inflation climate has changed from an ice age to galloping global warming. Policymakers need to devote as much thought to this climate situation—or more!--as with what’s going on in Copenhagen.

4. The best that can be said? It’s tough to get price increases in declining markets. Hence, the firming of prices could be an indication of a firming of the economy. For example, capital equipment prices rose 0.4% in November (but are up only 0.4% over the last year).

5. Energy is hot, again. Finished energy prices climbed 6.9% (y/y = +9.9%) while crude energy prices rocketed 12.2% higher (y/y = +8.5%). Meanwhile, Washington fiddles while consumer purchasing power burns. There has been much discussion of where we want to be in the long run, but little strategy devoted to the bridge that gets us there without much disruption. OR maybe THAT is the strategy?!

6. Blame it on bad weather? Food price increases are eating up purchasing power, too. At the Finished Goods level they went up 0.5% (after +1.6% last month) and at the Crude Goods level they increased 2.6% (after +5.2% last month). They saw frost in the California growing region and too much rain in Florida.

7. Early signs? Some of the Finished Goods that go into homes continued to see price weakness (e.g., floor coverings, HH appliances), but log prices at the Crude Goods level increased 1.0% and softwood and hardwood prices at the Intermediate level firmed (+1.9% and +1.0%, respectively). So maybe something is beginning to stir for new home construction.

8. Parting shot. The November pop in wholesale prices was NOT a statistical quirk. There is now a lot of price pressures in the pipeline that will come bubbling up.

9. The numbers, part 2. The NY Fed Empire State Manufacturing Survey Index plunged 21 points, to +2.6. This is a diffusion index that shows incremental change for NY-area factories. First, it is positive, so manufacturing still increased slightly. Second, factories were building on previous gains. In October, the index was near a record high, at +34.6. But the survey also showed increased price pressures and a weakening employment situation.

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Here’s my quick take re inventories and sales (12/11/09):

1. The numbers. Total business sales for October jumped 1.1%--a good month!—while inventories increased 0.2%. This is the first increase in inventories since August 2008. There was across-the-board sale strength at all levels of the supply chain.

2. Recession over! Total inflation-adjusted sales is one of the primary indicators that the Business Cycle Dating Committee of the NBER uses for accessing the timing of recessions and recoveries. Even after inflation takes its bite out of the October increase, there is a healthy advance—an indication consistent with “recovery.”

3. Manufacturing dynamics. Sales growth (y/y) is greater than inventory growth-- -8.2% versus -12.6%--a configuration generally associated with increases in industrial production.

4. Gee, what about GDP? Production increases have stemmed the drawdown of inventories, the proportions of which have been historic. When the rate of disappearance of inventories diminishes, that’s a PLUS for GDP accounting. This is undoubtedly happening in Q4—a very accretive factor for Q4 GDP growth.

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Here’ my quick take re retail sales and int'l trade prices for November (12/11/09).

1. The numbers, part 1. Retail sales for November increased 1.3%; ex-autos, they rose 1.2%. These figures substantially exceeded more moderate expectations. Y/y sales are up 1.9%. Write this down: the December y/y will be up somewhere near 5%.

2. Knock-knock. Who’s there? The consumer! The October-November average of retail sales stands 4.9% (AR) above the Q3 average. November alone is up 7.6% versus the Q3 average. I smell upward revisions to Q4 GDP estimates.

3. A bad day for turkeys? Food/beverage store sales increased 1.0% for November, so there were a lot of trimmings sold, too. And the day after Thanksgiving, a lot of big screen TVs were bought, as electronic/appliance store sales jumped 2.8%.

4. Is the consumer back in the driver’s seat. Apparently, yes. Motor vehicle and parts sales increased another 1.6%, on top of a 7.1% October increase. Sales are now up 5.1% on a y/y basis. Those that say that “cash for clunkers” merely changed the timing of sales rather that generated new sales are simply wrong—the numbers just don’t work out to support that view. Take out July and August, when sales were boosted by government incentives; sales for September to November still average more than that seen during the first half of the year.

5. What’s hot? November’s weather. That kept November apparel sales of winter clothing ( = -0.7%) on the shelves and racks. A 6% increase of gasoline station sales pushed up the nominal sales total $1.9B, or 0.5%. But note that it did not totally crowd out other spending. General merchandise store sales expanded a healthy 0.8% in November on top of a 0.9% October advance.

6. Housing spillovers? A mixed bag. Furniture store sales dipped 0.7% but hardware store sales recovered 1.5%.

7. The numbers, part 2. Knock-knock. Who’s there? Inflation! Import prices jumped 1.7% in November. Prices were catapulted higher by energy imports (+7.3%), but even excluding fuels, import prices still stepped 0.4% higher. The 12-month change of import prices was -19.1% in July, but now is +3.7%. Export prices grew 0.8%, which breaks down to a 3.7% rise of ag export prices and a 0.7% increase of non-ag export prices. Seriously, when are the Markets going to wake up to discover a budding price problem—slack or no slack?

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Here’s my quick take re international trade for October (12/10/09:

1. The numbers. The balance of trade on goods and services improved $2.8B in October (versus September)—a result much better than Consensus expectations. (ClearView Economics was expecting an improvement of $1.5B, while the Consensus was anticipating a small deterioration.) Exports grew $3.5B while imports edged just $0.7B higher.

2. Wait: it gets better. The reported numbers are in nominal (simple dollar) terms. More important are the figures in volume terms. The trade deficit in real terms fell $3.5B. Now get these growth rates: October exports versus the Q3 average level shot 26.6% higher while imports similarly computed expanded 13.8%.

3. Do you know what this means? U.S. imports are expanding a quick pace because the U.S. economy is growing at a decent rate. U.S. exports are soaring because the world economy is rapidly rebounding and because America’s foodstuffs and wares are great bargains at current exchange rates. If the October real trade deficit persisted for the rest of the quarter, then net foreign trade would make a nice one-half percentage point contribution to Q4 GDP growth. We might actually do better than that.

4. From where do we get our “advanced technology” products? America’s deficit on “advanced technology” products dipped a bit in October, to $5.6B, from $6.0B in September. Geographically, much of our advanced technology products come from China (!) : $9.4B of imports of advanced technology goods, versus $1.7B of exports to China, for an October deficit of $7.7B. Year-to date: $77.8B of imports versus $15.0B of exports, for a deficit of $62.7B. (This surprise me!)

5. More on China. While the overall trade deficit receded, the bilateral trade deficit with China increased again, to $22.7B (up $0.6B). October exports to China grew $1.1B (to $6.9B) but imports swelled $1.6B (to $29.5B). But the U.S. Treasury has determined that the Chinese do not manipulate their currency. (I wonder how this is working out for the Europeans?)

6. Greasing the trade flows. Both the quantity of imports and the price of petroleum products decline in October. The quantity fell 9% while the average price dipped $0.78/barrel (to $67.39/barrel). This helped lower the nominal trade deficit $2.4B.

7. A worldwide capital spending boom? Well, maybe boomlet. U.S. exports of capital goods rose $1.2B and imports of capital goods increased $1B. These are monthly growth rates in excess of 3%, which annualize to sizable rates of increase.

8. Bonus. Weekly initial claims for unemployment compensation rose 17k, to 474k, for the week ending 12/5. The 4-week moving average for initial claims came to 474k for the latest week. Initial claims average 658k in March of this year, so a significant downtrend remains in force. Continuing claims dropped 303k in the latest week (to 5157k); continuing claims, however, can fall because people find work OR they run out of benefits.

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Here’s my “rapid response” quick take re employment for November (12/4/09):

1. The numbers. Nonfarm payrolls dropped only 11k for November. The unemployment rate dipped to 10.0%. More stats: average hourly earnings = +0.1% (y/y = 2.2%); the average workweek = 33.2 hours, +0.2 hours (the manufacturing workweek = 40.4 hours, +0.3 hours, overtime increase = +0.1 hour). Finally, in terms of revisions, 159k fewer jobs were lost than previously reported. Things are still getting “less bad,” but this is the best payroll result since December 2007.

2. Recovery, here we come! The recovery is starting to get labor market traction. Perhaps the most important employment indicator in the report is the total labor input into the economy, which combines payrolls and the workweek. That increased about 0.6%--an advance that we have not seen since 2005. This report supports the notion that the huge productivity increases that we saw in Q3—8.1%--was an increase that cannot be sustained because the working labor force was being stretched too thin.

3. What does “V-shaped” means? It means the ascent is very nearly the mirror image of the descent. If you look at the picture of job declines (below), it looks pretty V-shaped (symmetrical) to me.

Some email programs will NOT display this picture. If you cannot see it, go to the link below, first page, right chart:

http://www.bls.gov/news.release/pdf/empsit.pdf

4. This “tell” tells the story. The lengthening of the workweek is a good sign that labor market conditions are improving. Perhaps an even more sensitive indicator is “temporary help,” which saw a 52.4k expansion in payrolls. With other payrolls down, this suggests that employers are still skeptical about the sustainability of the recovery, but nevertheless, they needed more workers to produce up to current demands.

5. Let’s not get carried away. Manufacturing still shed 41k workers and construction payrolls shrank 27k. Of 271 industries, 40.6% saw job increases. This is up from 32.5% in October.

6. A suspicious decline. Have we seen the end of the increases in the unemployment rate? Don’t bet on it. In the Household count, employment DID grow by 227 persons—that’s unambiguously good. Unemployment receded 325k, BUT another 291k dropped out of the labor force—adding to the ranks of discouraged workers. At some point an improved labor market will encourage the large pool of discouraged workers to come in from the sidelines, rejoining the ranks of the unemployed first, en route to employment.

7. Holiday jingle. Average weekly earnings rose 0.66%, a healthy increase (which surpasses inflation). More money in pockets could fuel somewhat better holiday sales without nicking the personal saving rate.

8. I hate this number. The unemployment rate including marginally attached workers, part-time workers, and discourage workers edged 0.3% lower, to 17.2%.

9. Implications. Job gains are in sight. With employment increases, we can expect people to begin buying some more homes, cars, appliances, etc. The clear improvement in the economy should help support further gains in stock prices—remember, we are still crawling out of a very deep hole. And the timetable for the Fed to begin backing away from an “emergency” level of interest rates (i.e., zero) will be moved up.

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Here’s my quick take re ISM for November and construction spending for October (12/1/09):

1. The numbers, part 1. The summary Purchasing Managers’ Index (PMI) from the ISM dipped 2.1 points in November, dropping to 53.6. Still , this suggest manufacturing is sustaining forward momentum. According to ISM estimates, the current PMI reading if continued would be consistent with 3.9% GDP growth. I think most folks would be happy with that in Q4 (but my numbers are slightly lower).

2. The upturn phase. Ordering is strong (60.3, up 1.8); production is solid (59.9, down 3.4); delivery times are lengthening (55.7, down 1.2); inventories are way down (41.3, down 5.6); and employment is starting to come back (50.8, down 2.3). These readings paint a picture of a cyclical upturn of manufacturing. Before the emails come pouring in, this does not mean that manufacturing is “strong.” Factory upturns begin from weak states.

3. Too low! That’s what purchasing managers shouted (index = 37.0, down 1.5) about customer inventories. Belly up to the bar and order some product to keep your shelves and warehouses from going bare. This will be a very dynamic positive force in manufacturing’s cyclical upturn.

4. Fly in ointment. The most troubling thing in the current scene is the price pressure being felt. (Prices paid index = 55.0, down 10.) Although this survey component was down for November, it must be remember that the pressures are still building (being above 50) AND that these pressures are incremental (on top of increases previously recorded). What model would explain so much price pressure with such low utilization rates and high unemployment?

5. The numbers, part 2. Total construction spending for October went unchanged for October. But this places October below the Q3 average.

6. A jewel amongst the junk. The shining gem in the October construction report was residential construction spending which jumped 4.4%! It’s up 5.5% (simple %) since July. Boom times! Well, that may be something of an exaggeration. But residential investment could register another quarter of 20% in Q4’s GDP accounts.

7. Downers. Public construction edged 0.4% lower. It looks like state and local fiscal weakness is trumping stimulus plan largesse. And private nonresidential construction spending plunged a broad based 2.5%. This is just a “good old cyclical decline”—which has a LONG way to go.

8. Bonus. Pending home sales for October ratcheted up another 3.7% (y/y = 31.8%), according to the National Association of Realtors. This was the 9th consecutive gain. With an ever-greater number of homes under contract, the follow-through likelihood is that existing home sales will subsequently increase. Gee, do you think there might be a housing recovery going on?

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