Mixed Data Fails To Dampen Economic Optimism

By John S. McClenahen Perhaps it was some economic wishful thinking: that new orders for manufactured durable goods would increase 0.7% in December 2002 and new home sales would be at a 1.13 million annual rate. Both fell short of economists' expectations but not enough to discourage all thoughts of economic recovery. Overall new orders for manufactured durable goods in December increased just 0.2% to $170.1 billion, says the U.S. Department of Commerce. However, Maury Harris, chief U.S. economist at UBS Warburg, New York, chooses to focus on the number of new orders for non-defense capital goods. It declined just 0.1% in December. That is "consistent with our forecast that capital spending on equipment and software will pick up in 2003," emphasizes Harris. What's more, he believes that a relatively strong showing by the new orders component of the Institute for Supply Management's manufacturing index in December "suggests that overall orders are poised to strengthen in coming months, even if the [Commerce Department's] December durables report did not show a decisive change in trend." Meanwhile, data from the Commerce Department and the U.S. Department of Housing & Urban Development show sales of new one-family homes were at a seasonally adjusted annual rate of 1.082 million in December 2002, still an impressive rate although a bit below the 1.13 million consensus figure calculated by Merrill Lynch. For all of 2002, new home sales reached a record 976,000, underscoring housing's strong showing in an otherwise unimpressive U.S. economy. The Conference Board's Consumer Confidence Index dropped nearly two points this month, with Lynn Franco, director of the New York-based business research group's consumer research center saying, "Now with the threat of war looming, consumers have grown increasingly cautious about the short-term outlook." The index, drawn from a survey of 5,000 U.S. households, now stands at 79.0 (1985=100). However, UBS Warburg's Harris notes that within the data "the percentage of those judging jobs as hard to get fell to 28.8% from 29.7% [in December 2002], while the percentage judging them to be plentiful climbed two points to 14.5%." Says Harris, "This better showing confirms the modest downtrend that has emerged in the jobless claims data."

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