The Lehmann
Letter (SM)
Autos and
housing once lived in the same world. Now they don’t. They used to move together.
Not anymore.
Households
can purchase new vehicles with consumer credit, which has rebounded strongly.
But it takes mortgage credit on top of a healthy credit score and a sound
balance sheet to acquire a new home. That’s a different matter and highlights
the peculiar nature of this recovery.
The April
reports on industrial production and housing starts, from the Federal Reserve
and the Census Bureau, confirms the dichotomy:
Capacity
utilization at the nation’s factories, mines and public utilities jumped from
78.4% to 79.2%. Look at the chart and you’ll see we’re swiftly approaching the
80% considered within the normal (80% - 85%) range. Soon we’ll be able to say:
Industry is back!
Capacity
Utilization
(Click on chart to enlarge)
(Recessions
shaded)
But we won’t
say that anytime soon for housing. April’s 717000 is a nice bump up from March’s
revised 699,000. Look at the chart, however, and you’ll say: Housing is not
back yet.
Housing
Starts
(Click on chart to enlarge)
(Recessions
shaded)
These data
reflect market realities: Autos are selling, but homes aren’t moving.
There’s more to
industrial production than autos. But new-vehicle sales provide a clue to
manufacturing, and they are both gaining.
Too bad the
garages are filling up but the homes aren’t.
(To be fully
informed visit http://www.beyourowneconomist.com/)
© 2012
Michael B. Lehmann
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