HOUSING
Weather worries
Thanks to a boom that has generated millions of new homes since 2000, the construction industry has created a solid roof over an economy that has otherwise seemed a bit shaky.
Until the last few months, no leaks were detected in the magnificent structure. But a nasty, bitter winter in much of the country has created concerns that home building activity might see a few drips.
Housing starts, the barometer of the industry, dropped a larger-than-expected 7.9 percent in January, after surging to a near 20-year high in December.
A fresh report, for February, rolls out Tuesday. Economist Lynn Reaser is looking for a modest advance, to an annual rate of 1.92 million units.
“Despite some bad weather, the overall story for housing remains very strong. February will mark the sixth month in a row that the rate has remained above 1.9 million,” said Reaser, of Banc of America Capital Markets in St. Louis.
She said builders remain supremely confident, as fears of a jump in mortgage rates continue to recede. Rates recently have plunged to bargain-basement levels not seen since July, while prices of homes continue to soar.
“The bad news for employment, namely very weak growth in new jobs, translates into very good news for housing, because mortgage rates remain quite low,” she said.
MANUFACTURING
Production keeps pace
More Top Picks Best Standing Desk Converters Under 200
By some measures, the manufacturing sector is booming, at levels not seen in about 20 years. The question is whether factories will be able to sustain the pace or order books will wither.
That brings us to Monday’s report on February industrial production and capacity utilization. In January, production leaped 0.8 percent, while the amount of production capacity in use rose to 76.2 percent.
However, much of that boost in output represented sky-high production by utilities, which struggled to keep up with deeper-than-usual winter chills.
Economists are expecting more good news from the factory sector, with production moving forward 0.4 percent, while unused capacity continues to shrink, with 76.4 percent of facilities being in use.
FEDERAL RESERVE
Policy remains on hold
Federal Reserve Chairman Alan Greenspan continues to say the economy is picking up and that fresh hiring is about to occur. But he’s not saying things are so robust that an interest rate hike is at hand.
Watch for Tuesday’s meeting of the Fed’s Open Market Committee, which sets monetary policy, to end with a muted statement about where the economy is headed. Short-term rates will be held steady, at a flat 1 percent.
Also on tap: the February consumer price index Wednesday and the month’s leading economic indicators Thursday. The CPI is expected to show a gain of 0.3 percent, on top of the 0.5 percent advance in January. The indicators will probably move only a tiny step ahead, by 0.1 percent.
EQUITIES
No cause for alarm
The stock market has entered a corrective phase, although the Dow did close Friday’s session on an up note.
The timing seems a bit odd, because corporate profits for the first quarter, due out in about three weeks, are expected to be up 15 percent or more from last year. But last week’s terrorist attacks in Spain added to concerns.
Chicago investment manager William Hummer, however, believes the brief pullback is no cause for pessimism.
“The economy’s underlying fundamentals are solid. Growth this year will be right around 4.5 percent, and the worries about jobs are similar to those we heard in 1992, before the last big hiring boom,” said Hummer, of Wayne Hummer Investments.