EQUITIES
The wild card
In the week ahead, a thick sheaf of economic indicators will be released. As usual, the reports will help economists get a better grasp of where the wobbly U.S. economy is heading.
None of those indicators, however, will help clear up the biggest wild card in the nation’s economic future: the question of whether, or when, the U.S. launches an attack on Iraq.
Until the prospect of war expenditures, skyrocketing global oil prices and the fear of terrorist attacks are resolved, it’s tough to make a reasonable forecast, suggests economist John Vail, senior strategist at Chicago-based Mizuho Securities USA.
If war begins, the stock market would likely react favorably, because an end to the uncertainty “in some people’s mind would initially be a positive.” But that early release could fade, he notes, “if Saddam manages to either torch his oil wells or create war damage on neighboring countries or U.S. troops.”
The U.S. will prevail, the economist says, “but the question is at what price.” As a result, “no one should be making [long-term] forecasts of the U.S. economy unless they’re experts in war strategies and outcomes.”
That said, some of the figures due out this week should be interesting.
HOME SALES
Extending boom
The current ultra-low mortgage rates have made homeownership affordable for many people who’d been priced out of the market when rates were higher.
That’s made new-home sales a bright spot in an otherwise lackluster economy. But sales of existing homes also get a bump from low rates. That’s because as homeowners sell their homes and move up to the bigger models they can afford with lower mortgage rates, first-time buyers purchase the starter homes being vacated.
In such a brisk marketplace, noted economist Celia Chen of the consulting firm Economy.com, home prices nationwide appreciated by more than 9 percent in the fourth quarter on an annualized basis. In December, existing-home sales rose by 5.2 percent, to an annualized rate of 5.86 million units.
“The strength in home sales is encouraging for an economy with an expansion that’s only limping along,” Chen says. Although the boom isn’t sustainable at recent strong rates, she adds, it’s very possible that housing “could hold up long enough for other drivers of economic activity to kick in.”
On Tuesday, the government will release January existing-home sales data, and experts figure the annual rate will ease fractionally, to a still-powerful 5.8 million units.
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CHAIN-STORE SALES
Blizzard a barrier
Also on Tuesday, the Bank of Tokyo-Mitsubishi chain-store sales index for the week ended Feb. 22 will be released. The index is only one of a number of economic barometers designed to take the temperature of the retail marketplace.
The previous week, sales were running strong through Valentine’s Day, but the blizzard that swept up the East Coast on Feb. 15 pulled the index down, and the week ended off 0.1 percent.
DURABLE GOODS
Auto-fueled gain
On Thursday, the Commerce Department will report the data for durable goods orders in January. Durable goods are big-ticket items, such as appliances, autos and factory equipment.
In recent months, a run-up in defense-related orders has pepped up durable goods data. But excluding defense, orders declined in November and December. The weakness in orders for airliners and telecommunications equipment has put heavy pressure on the durables index, and there’s little evidence either of those two crucial product segments will see a rebound anytime soon.
Durables haven’t displayed a solid trend for several months, but instead have bounced up and down as the stalled economy struggles to rebound. Because automakers have once again cranked up their on-again, off-again promotional pricing campaign, January’s orders are expected to show a solid 1 percent increase.