Last week, a better-than-expected jobs report inspired scoffing among those to whom good economic news is bad political news, including suggestions that the government numbers had somehow been cooked as part of a political conspiracy.
That doesn’t seem to have been the case, as economic data continue to surprise on the upside, from government as well as private economic sources, and across economic sectors:
The economy is improving more than professional forecasters anticipated, particularly in data on employment and housing, according to the Bloomberg Economic Surprise Index, which compares 38 indicators with analysts’ predictions. The index, based on gauges compiled by private businesses and trade groups in addition to government, confirms U.S. growth is generating jobs in the face of a global slowdown and looming federal spending cuts and tax increases known as the fiscal cliff.
“The economy is improving, and the labor market is getting better,” said Robert Brusca, president of Fact & Opinion Economics and a former New York Fed economist. “These numbers are what they are, they’re not being slanted. On a scale of one to 10, the economy is at a fairly firm six and may be heading higher….”
The Thomson Reuters/University of Michigan’s preliminary October reading on the overall index on consumer sentiment came in at 83.1, up from 78.3 the month before, and the highest since September 2007, the survey showed on Friday.
The new buoyancy among consumers comes shortly after the U.S. unemployment rate tumbled to its lowest in nearly four years in September as more people returned to the workforce and found jobs than economists had predicted.
“We are getting some quite interesting signals from consumer sentiment and employment data – both (the) unemployment rate and initial claims – that there has been some quite significant improvement in the economy,” said David Sloan, an economist at 4Cast in New York.
WASHINGTON — Retail sales rose a larger-than-expected 1.1% in September as consumers shook off fears of looming economic problems and continued to boost their spending after pulling back earlier this year.
The new data Monday came as the Commerce Department revised August’s increase in retail sales to 1.2% from the earlier estimate of 0.9%. That meant the rise in August was the largest monthly gain since October 2010.
Economists had expected a 0.8% increase in September, according to a survey by Bloomberg. Retail sales last month were up 5.4% from a year earlier. Sales for the three-month period ending in September were up 4.8% from the same quarter in 2011.
Despite some nagging doubts that have remained over the U.S. housing market, consensus is that housing has turned the corner and is recovering.
In his latest note titled The Housing Recovery Is For Real, Deutsche Bank’s Joseph LaVorgna writes that the “residential housing market is in the very early stages of a durable recovery.”
LaVorgna says this recovery in housing is important because housing is what led the U.S. economy into a recession, and is part of the reason the recovery has been so slow. Moreover, as “a leading indicator of underlying domestic demand,” any improvement in housing suggests that underlying domestic demand should improve as well. From Lavorgna:
‘…. At minimum, the strength in residential construction suggests it is unlikely that underlying domestic demand will weaken further. This provides us with some comfort that the recent sub-par performance in the economy is not long lasting and that over time, domestic demand will strengthen, perhaps as concern over Europe fades a bit and the “fiscal cliff” is adequately dealt with.’ “
Fitch Ratings raised its projection for single-family starts and new-home sales this year, but warned housing growth could be somewhat less robust in 2013.
The ratings company expects single-family housing starts to improve about 19% in 2012, with new-home sales and existing-home sales increasing 19.5% and 8.5%, respectively.
Fitch, last month, forecast a 12% rise in single-family housing starts, 10.5% growth in new-home sales and a 5.6% bump in existing-home sales.
Fitch said the year-over-year gains for single-family starts and new-home sales earlier this year have sustained momentum. Meanwhile, seasonally adjusted statistics for single-family starts, new homes and existing-home sales have also been advancing most months.
From Ward’s Automotive Group, the auto industry newsletter, reporting a surge in fourth-quarter auto production in North America:
Hot on the heels of an estimated 20,300-unit September production shortfall, North American car and truck assembly plants are embarking on an even more robust fourth-quarter program than the one put in place a month ago.
Although Ford has not yet revealed what revisions it has in store for October-December, the rest of the industry already has boosted production plans by some 53,900 units for the period.
The bulk of the increase is set to occur this month with 61,700 units added to the October slate, some of which likely were deferred from September and some pulled forward from December’s plan, now 16,400 units lower than it was a month ago.
But, even assuming the entire September and December downward volume adjustments are included in this month’s higher schedule, that still means an additional 16,700 vehicles in the October boost, on top of which some 8,600 units have been added to the November plan.
The largest Q4 increase comes from General Motors, up 18,500 units, mostly cars, including gains of 26,000 in October and 3,000 in November, followed by a 10,500-unit cut in its December slate…
Incorporating the revised outlook, North American plants now are in line to build some 15,692,200 cars and trucks this year, up 16.5% from 2011’s 13,471,500 completions.
– Jay Bookman