Recap and Expectations

The Lehmann Letter (SM)

February has had a strong start: Employment up, consumer credit up, auto sales up.

Two questions remain: Will housing be equally strong? Will production and business investment continue growing?

There is only a slim chance that housing will make similar gains. This sector has been so weak and prices continue to decline. Sales and building have bottomed and there are glimmers of an upturn. We can hope that glimmer shows real light, but we are still a long way from bright.

Production and business investment have been stronger. The Fed will report on industry’s capacity utilization next Wednesday and the Census Bureau will release data on capital-goods orders on the last day of the month. Both have recovered more strongly than housing, but have not been robust. They have to keep gaining before we can say they’ve made the transition from recovery to expansion.

Here’s the calendar:

Housing starts ..................... February 16
Existing-home sales .............. February 22
New-home sales ................. February 24

Capacity utilization .............. February 15
Nondefense capital goods ...... February 28

We’ll see.

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© 2012 Michael B. Lehmann