Thursday, December 25, 2014

Other than retail, the economic Grinch has stayed away

Economics in a nutshell: It's a holly, jolly data Christmas as all signs point to an accelerating economy.

Other than retail, the economic Grinch has stayed away

FILE - In this Thursday, Nov. 28, 2013, file photo, Robert McCormick, 23, whose car is not big enough for a 60-inch HDTV he purchased from a Kmart store, talks on the phone while waiting for his father-in-law to bring his pickup truck in Anaheim, Calif. The Commerce Department releases the report on durable goods for November, on Tuesday, Dec. 24, 2013. (AP Photo/Jae C. Hong, File)
FILE - In this Thursday, Nov. 28, 2013, file photo, Robert McCormick, 23, whose car is not big enough for a 60-inch HDTV he purchased from a Kmart store, talks on the phone while waiting for his father-in-law to bring his pickup truck in Anaheim, Calif. The Commerce Department releases the report on durable goods for November, on Tuesday, Dec. 24, 2013. (AP Photo/Jae C. Hong, File)

INDICATOR: November New Home Sales and Durable Goods Orders

KEY DATA: New Homes: -2.1%; Prices (Year-over-Year): +10.6%/Durables: +3.5%; Capital Spending: +4.5%

IN A NUTSHELL: "It's a holly, jolly data Christmas for the economy as all signs point to an accelerating economy."

WHAT IT MEANS: While retailers may be readying themselves for the post-Christmas sale of all sales because of sluggish December sales, the economy itself is not the problem, by any means. Durable goods orders surged in November as a large number of industries posted robust gains in demand. The machinery, computers, communications equipment, vehicles and aircraft industries all did extremely well. Only metals and electrical equipment and appliances were down. Non-defense, non-aircraft capital goods orders, the best measure of private investment activity, jumped sharply as well, pointing to growing confidence on the part of businesses. Even with firms pushing the product out the door, inventories still built and that points to improving output in the months to come.

Not only did big-ticket demand grow hardily, but households weren't really Grinches when it came to buying homes. Okay, home sales eased in November, but at least when it comes to new homes, the level of demand remained quite strong. There was a nearly eighteen percent jump in demand in October so the modest decline in November still puts sales at the second highest pace in 5½ years. Prices were up quite strongly while inventories keep falling. That is a recipe for further prices increases.

MARKETS AND FED POLICY IMPLICATIONS:

It's beginning to look a like strong growth,
Everywhere you see.
Take a look at the durables goods,
They're robust once again,
With housing prices causing lots of glee.

Okay, I'm a really bad poet and I apologize for ripping off a wonderful Meredith Wilson song, but it's nice to bring something positive to the economic story. So on that note, I will simply say: Merry Christmas

About this blog
Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm in Bucks County. He advises companies across the country on the risks and opportunities that economic developments may have on the organization’s operating environment. An accomplished public speaker, Joel’s humor and unique ability to make economics understandable have brought him a wide following. Reach Joel at joel@naroffeconomics.com .

Joel Naroff
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