Wednesday, February 17, 2010

Good News

The Lehmann Letter SM

Today the Census Bureau reported 591,000 housing starts in January, a gain of 2.8% over December's figure:

Any increase is a welcome sign, but the chart below shows that we have been stuck in a rut of fewer than 600,000 starts for a year. There won't be true recovery in residential construction until we reach and surpass a million starts. And that depends on a resolution of the foreclosure crisis. Too many homes continue to be dumped on the market at a steep discount. That discourages builders from starting new ones.

Housing Starts

Click on chart to enlarge.)

Recessions shaded

In another report released today, the Fed announced that industrial production and capacity utilization had both risen in January:

Capacity utilization now stands at 72.6%, a nice pop up from its steep trough below 70%. Industry is now ramping up production after liquidating its inventories. Yet you can see from the chart how far we have to go. Once businesses replenishes their depleted inventories, will production languish or continue to climb? That depends on whether or not the private sector can restore a robust rate of borrowing and spending.

Capacity Utilization

(Click on chart to enlarge.)

Recessions shaded

The news is good, but we have to build on today's numbers before we can rest easy.

(The charts were taken from [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2010 Michael B. Lehmann

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