Monday, March 2, 2020

February data starts with a positive note

 - by New Deal democrat

First of all, let’s all acknowledge that all of this data is likely to be big-footed by the effects of coronavirus. But it is still good to know the underlying state of the economy.

And in that regard, we got two decent numbers this morning.

First, construction spending for January rose 1.8%. Even better, private residential construction spending rose 2.1%, as show below (blue) in comparison with single family housing permits (red):

These are the two least volatile number in the very forward-looking housing sector. Note that construction spending does lag permits, but it nevertheless leads the economy overall. This is a positive for the second half of this year.

Second, the ISM manufacturing report for February was the second (ever so slightly) positive month in a row, at 50.1 (over 50 means expansion). The new orders component  did contract, also very slightly, at 49.8:

This is a short leading indicator, suggesting the producer side of the economy treading water in the next few months.

If we didn’t have one of the four horsemen of the apocalypse galloping into the picture, these would both be signs of no worse than a slowdown in the economy as we go later into 2020.