Today's releases on new home sales and durable goods orders showed modest March declines. But after the February gains still stand above the January cyclical lows. Too early to call a turn in the trend but even stability is a very welcome state after the sharp and steady declines in 2008.
Durable goods orders represent demand for longer lasting capital investment. Sure, consumer cars and household appliances are included but its largely of measure of business investment which has fallen like a stone since mid 2008.
Core capital goods which exclude military equipment and weighty aircraft orders are the best early measure of business investment demand as the back to back monthly gains followed a very steep January drop. However, shipments (sales) which follow orders and are reflected in the GDP report showed continued declines and should leave even a stronger first quarter decline in business investment than the plunge in the fourth quarter. Bottom line, the forward read is improving.
New home sales edged lower in March but also stand above the January level. Here also we're watching for signs of stabilization after the collapse over the last few years. Signs of stabilization have been noted by some in existing home sales but the inclusion there of foreclosure sales has left a deceiving headline (West coast resales are up 19% from a year ago and there's no booming market in CA or Las Vegas).
Stability in new home sales (home demand) leads to increased stability in home prices and foreclosures and new building before the turn higher takes shape. Early signs are beginning to show up and will provide more lift to consumer confidence as well as the deeply injured housing market. Turning points are easy to see only well after they have arrived.
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