Monday, July 26, 2010

New Home Sales RECORD!!!

If you've been reading along you know that there is going to be a catch with any headline like that one. Yes, new home sales in June did technically increase by greatest amount from the previous month ever. Here's the catch - actually there are two problems with this data -

1) June 2010 was actually the lowest number of June new home sales EVER. If you ignore all of the month to month data and consider that June is the peak of the summer sales season this number is a disaster. With all of the tax credits, etc., it's not hard to believe that June was a record month, but it is surprising that the record set was for the worst June since data was collected.

2) The revisions to previous month's data makes this month's "gain" worthless. In May the government reported new home sales had occurred at a 300k annualized rate. Now they've said "Ooopsie" and sales really occurred at a 267k which is the lowest number ever recorded. This coupled with ANOTHER downward revision of the April data more than offsets any perceived benefit from June's data.

However, the computers don't care about shades of grey they see things in red and green and today it's all green.

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I don't tend to place a great deal of weight on the many regional manufacturing reports but the trend across all of the reports has turned decidedly negative.

"The general business activity index fell sharply to –21, its lowest level since July 2009. Thirty-one percent of firms reported a worsening of activity, up from 22 percent in June. The company outlook index also fell to a 12-month low, as only 13 percent of manufacturers said their outlook had improved over the previous month, compared with 24 percent who said it had worsened."

This fits with the trend I'm seeing across many industries. Business activity is worsening but firms remain profitable as they cut costs.

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Cheers!

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