The March Economic Pulse

It seems that every time a new economic indicator is released, whether it pertains to the housing market, job data, retail sales or consumer confidence, the market jumps to factor in the new information, only to slowly move back to its fundamental value over the next few days. After the initial adjustment, a new indicator is released and the process repeats itself once again. (The tools in Economic Indicators For The Do-It-Yourself Investor put the market (and any evaluations) in your hands.)

In Pictures: The Biggest Bank Failures

For example, a report stating that GDP exceeded expectations can cause a sudden surge in the market, which will be followed by a slow correctional period. If a subsequent finding indicating an increase in unemployment follows, equities drastically move the other way, once again deviating from the underlying fundamentals. A more appropriate way to analyze indicators is to conduct a comprehensive investigation of a number of economic figures, rather than focusing on a single variable.

March Results
For the purposes of this analysis, 10 major economic indicators are included to present an overview of the general trend and activity in March. Overall, we witnessed a mix of results making the headlines throughout the last month - some positive, some negative. Most indicators, however, showed marginal positive results when compared to February's announcements, and especially when compared to March, 2009. (Leading indicators help investors to predict and react to where the market is headed. Find out more, in Leading Economic Indicators Predict Market Trends.)

Housing
Housing data was fairly stable, although a slight negative trend was observed. Housing starts decreased by 1.61%; housing sales decreased by 0.59%, and housing prices remained basically flat. When compared to last year's figures, starts and sales increased by 11.27% and 7.04% respectively, but home prices actually saw a decrease of 1.84%.

Job Market
The job market is still bleak as the unemployment rate remains at a staggering 9.7%, which is actually 1.5% above where it was last year. Likewise, the number of people unemployed for an extended period of time (at least six months) increased by 106.92% within the past year. Nonetheless, half-year unemployment is steadily decreasing and initial jobless claims have decreased by 11.24% and 31.24% on a month-over-month and year-over-year basis, respectively.

Retail
Retail has made a drastic year-over-year comeback, while monthly data is only slightly positive. Total retail sales increased to $355.5 trillion, from $354.3 trillion in the month before. However, car sales experienced a significant monthly decrease of 2.28%. The decrease can probably be attributed to the recent plethora of automotive recalls rather than the consumers' unwillingness to spend. (The institutional sector offers an intellectual and financially rewarding alternative. Find out more, in Do You Belong In Retail?)

Outlook
Despite the gloomy data emerging from the housing and employment sector, businesses and consumers are confident in future prosperity. The business outlook, compiled by the Federal Reserve Bank of Philadelphia, increased to 18.9 this month, from 17.6 in the previous period, a massive upswing from last year's value of -35. Likewise, consumer confidence escalated from 26 in 2009, to 26.4 in February ,and 52.5 in March.

Economy
Overall, the monthly indicators released in March do not show a convincing picture of economic improvements. Despite that yearly values are undoubtedly superior to those of March, 2009, monthly progress, especially in terms of unemployment, still presents challenges to a full recovery. The indicators which strongly suggest economic growth do not pertain to hard sales or employment figures, but reflect the consumer and producer outlook, which are the most likely drivers of the 6% monthly increase of the S&P.

Because the housing market must still stabilize and unemployment must reduce, these issues need to be addressed within the upcoming months. After passing the health care reforms, earlier on this month, hopefully the American government will now be able to focus on some of these other pressing issues.



Summary of Results

Index


This Month


Last Month


Last Year


Monthly Change


Annual change














Housing Starts *


612


622


550


-1.61%


11.27%


Existing Housing Sales*


5020


5050


4690


-0.59%


7.04%


Housing Prices*


1651


1649


1682


0.12%


-1.84%


Employment Report


9.70%


9.70%


8.20%


0.00%


18.29%


Half Year Unemployment*


6133


6313


2964


-2.85%


106.92%


Initial Jobless Claims*


442


498


642


-11.24%


-31.15%


Business Outlook


18.9


17.6


-35


1.91%***




Consumer Confidence


52.5


46.4


26


13.15%


101.92%


Retail Sales**


355.5


354.3


342.4


0.34%


3.83%


Car Sales **


51.5


52.7


50.1


-2.28%


2.79%














S&P 500 Index


1169.45


1104.49


797.87


5.88%


46.57%

*Thousand
** Billion
***Adjusted for mean and standard deviation


Still feeling uninformed? Check out last week's business news highlights in Water Cooler Finance: Zombies File Taxes, Dead Bills Rise Again.




comments powered by Disqus
Trading Center