HOME CONSTRUCTION
Hammering away
The construction industry continues to grind out near-record numbers of new homes, and Americans line up to buy. Recession? What recession?
Through economic rain or shine, this scenario has become accepted as normal. What could occur to hamper an industry that has become a linchpin of the nation’s continued expansion? For now, not much.
Economist Sung Won Sohn looks for Tuesday’s report of January housing starts to show a gain of more than 1 percent, to an annual rate of 1.585 million units from 1.57 million a month earlier.
“Housing starts are basically stable, although they have been trending down very slightly,” said Sohn, of Wells Fargo & Co. in Minneapolis. “The outlook for the industry is that, after last year’s record performance, 2002 will be very near another record.” On the downside, Sohn said builders are faced with constructing smaller homes, as the market moves in the direction of affordability. That means activity is softening for companies that were creating million-dollar behemoths.
Sohn said “the mortgage market is booming, and most of the activity is for buying homes, not just refinancing.”
LEADING INDICATORS
Gains expected
At this point, doubts are setting in about whether the vaunted economic recovery, which has been promised for months, will need to be postponed once more. Interest will be keen in Thursday’s report on January’s leading economic indicators. Economist Lynn Reaser is looking for a gain of 0.4 percent, following the 1.2 percent advance a month earlier.
“This will be the fourth month in a row that the indicators have shown a gain. It’s a very important signpost that the recession is coming to an end,” said Reaser, of Banc of America Capital Management in St. Louis.
She said a dramatic jump in consumer expectations last month, fed by lower energy costs and lessened anxiety over terrorist attacks, helped to boost the indicators.
“Consumers continue to spend for new cars, homes and merchandise,” Reaser said. “The main thing holding the economy back at this point is continued reluctance among corporate executives.”
A DAY OFF
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T bills on Tuesday
Stock, bond, commodity, futures and options markets will be closed Monday for Presidents Day, along with government offices and many banks. The weekly auction of Treasury bills will take place Tuesday.
Meanwhile, with fourth-quarter corporate profit reports out of the way (they were down more than 20 percent), Wall Street approaches the advance of spring with a modestly more upbeat tone. The Dow Jones industrial average last week even managed a brief trip above 10,000, only to fall back.
Bannockburn-based mutual fund manager Henry Van der Eb, of the Gabelli Mathers Fund, sees little chance, however, that the market can move much higher. He says it remains historically overvalued in relation to the size of the economy. “Ten trillion dollars of U.S. gross domestic product cannot generate sufficient sales and earnings to support $15 trillion of stock market capitalization,” he says in his latest newsletter.