INDICATOR: February Supply Managers' Non-Manufacturing Survey/CoreLogic Home Price Index
KEY DATA: ISM (Non-Man.): up 0.8 point; Orders: up 3.8 points: Employment: down 0.3 point; Inventories: up 7 points/Core Logic (1 '12-1 '13): up 9.7%
IN A NUTSHELL: "If you are wondering why the stock market is hitting new highs, look no further than the economy as all segments seem to be growing faster."
WHAT IT MEANS: The government may be in gridlock but the private sector is not. It seems that despite the worries about sequestration, or maybe because there are few concerns about it so far, business activity is improving. The Institute for Supply Management's February reading on the non-manufacturing portion of the economy improved solidly, mirroring a similar gain in the manufacturing sector. Leading the way was a large increase in new orders. Only thirteen percent of the respondents indicated that demand moderated over the month. While the employment index eased back, it still remained near record highs. And inventories are building. Remember, a sharp cut back in inventories was a primary factor in the weak fourth quarter GDP number. As expected, inventories are being rebuilt and that should provide a nice boost to first quarter growth. With order books filling, activity in the construction and service portion or the economy should continue to improve.
In a separate report, CoreLogic indicated that home prices continue to jump, rising solidly in January. In addition, the nearly ten percent gain over the year was the largest since the bubble month of April 2006. Even excluding distressed homes, prices were still up by 9%, a clear indication that the housing market is making huge strides in its recovery. Indeed, excluding the investor driven distressed home market, no state posted a decline in prices over the year.