Monday, January 25, 2010

The trouble with data...

Fantastic work by B. Ritholtz at The Big Picture. The government quietly revised Durable Goods data for November and it shows a big drop as opposed to the initial reported gain.

We're going to see probable bump again in December as a result of further inventory builds, but it highlights the problems with trying to analyze real-time data from the government given the size and complexity of the US economy.

Existing home sales plummeted 17% in December the largest monthly decline since records began back in 1968. However, I'd caution that November was artificially stimulated by the expected expiration of the first time homebuyer tax credit, so December's drop is probably not as bad as indicated by this data. However, expect the lobbying groups to use this data to their advantage -- "Look what will happen to sales if you let the tax credit expire!!".

Existing home sales are an important indicator for other aspects of the economy because existing home sales lead to home improvement expenditures and capital goods purchases.


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