Today we had a couple of economic data releases. By and large the data is confirming the view that the the pace of growth in the economy started slowing down withing the last 1-2 months. So here was the data from today
- Unemployment claims dropped to 409K from 434K last week. This is a good sign that we are not decelerating very fast in the economy. But a level above 400K is still not a good number. I do think that a big part of the rise in layoffs over the last few weeks was related to the Auto plant shutdowns due to lack of part supplies from Japan
- The Philadelphia fed survey of businesses fell pretty fell pretty sharply to 3.9 from 18.5 last month. This again a month to month indicator, so we are seeing growth but it has slowed down sharply
- Existing homes sales were also disappointing, falling to 5.05 million annualized rate from 5.1 million last month. This is an important data point, as we really need existing home sales to increase to clear out the inventory of homes and restore some health to the housing market. So far it shows the housing market is languishing at the bottom. I think it will probably be a 1-2 years before we get any improvement in the housing market.
My current view on the economy is very similar to the one held by Economic Cycle Research Institutes’s (ECRI) Lakshman Achutan. I think we are slowing but we will not go into a recession.