| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy


How to use our RSS feed

Follow Finfacts on Twitter

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News


Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News




Content Management by interactivetools.com.

Analysis/Comment Last Updated: May 19, 2011 - 8:03 AM

Dr. Peter Morici: US home sales, gas prices and stocks
By Professor Peter Morici
May 19, 2011 - 5:11 AM

Email this article
 Printer friendly page
President Barack Obama works as his motorcade arrives at Bradley International Airport in Windsor Locks, Connecticut, May 18, 2011.

Dr. Peter Morici: US home sales, gas prices and stocks; Thursday, economists expect the National Association of Realtors to report existing home sales were 5.2m in April, up modestly from 5.1m in March but down significantly from 5.8m last April.

If April sales come in lower than economists expect, stock and bond investors will interpret this as bad news. Along with declining housing starts, slow traffic at new home showrooms and flat industrial production data for April, disappointing existing home sales would be interpreted by investors that the already weak economic recovery is losing steam.

My view is that both equity and bond traders are misreading housing and industrial production data.

The US housing market was already holding back the recovery—nothing new in these data indicates a much larger drag for the second quarter. The economy need not be led out of recession by new home construction, and for seven quarters, the economy has expanded without a housing construction recovery.

Simply, during the boom of the last decade,ms too many houses were built—many were sold to buyers who could not afford them and others as second homes. In the wake of the financial collapse, Millions of homes are moving through bankruptcy sales—albeit at a slower pace in recent months owing to the Robo Scandal. Still this overhang will keep new home construction subdued and kill the modest recovery in prices that began and then faltered last spring.

Prices are likely to firm this spring and summer. Already prices have firmed in places like Washington, Manhattan and Dallas, thanks to strong employment and payroll growth in the federal government, finance and energy but overall, buyers are more confident that a bottom has been reached. Don’t expect rising prices to much add to consumer wealth and spending, but we are nearing the end of the subtraction. Incidentally, you won’t see this soon in the much watched Case-Shiller, S&P indexes of home prices, because those data lag several months—March data will only be released on May 31.

Economic growth was a tepid 1.8% the first quarter—demand was weighed down by the continuing slip in housing prices, higher gas prices, a drop in defense spending, and bad weather slowing non-residential construction.

The April data we are now seeing for industrial production reflects higher gas prices and the supply chain effects of the disaster in Japan. The nadir in defense spending and construction are reversing and manufacturers are finding ways to accommodate shortages from Japan. Moreover, oil prices have pulled back and gas prices are starting to level off and fall a bit. Economists are expecting second quarter growth better than 3%—my forecast is 3.1%.

In the second half, growth will slow but stay above 2.5% and the recent dip in corporate earnings and expectations will prove temporary.

The key thing is that the data the stock market is panicking now about reflects a passed reality—rising gas prices and falling home prices and construction and defense spending from the first several months of this year. By all reports those factors have either abated or reversed, and for now, the recovery—though not a champ-- is stabilizing.

Investors should continue to look for value—they will be feeling much better about equities soon. After the usual spring lethargy passes, the summer rally will redeem the optimists.

Chairman of Economic Advisers Goolsbee Talks Job Growth:

Peter Morici,

Professor, Robert H. Smith School of Business, University of Maryland,

College Park, MD 20742-1815,

703 549 4338 Phone

703 618 4338 Cell Phone




Related Articles
Related Articles

© Copyright 2011 by Finfacts.com

Top of Page

Latest Headlines
Disastrous 44-year War on Drugs and ignoring the evidence
HSBC & Tax Evasion: France/ Belgium issued criminal charges; UK/ Ireland nothing
Analysis: Germany world's top surplus economy; UK tops deficit ranks
Facts do not always change minds - can even entrench misinformed
Finfacts changes from 2015
Facts of 2014: Guinness not Irish; 110 people own 35% of Russia's wealth
In defence of dissent and Ireland's nattering nabobs of negativism
Dreams of European Growth: France and Italy facing pre-euro economic problems
Globalization's new normal needs permanent underclass - Part 1
MH17 and Gaza: who is responsible?
Israel vs Palestine: Colonization set for major expansion
Aviva Ireland's 'fund' runs dry and life cover to die for
We wish Martin Shanahan - new IDA Ireland chief - well but...
Ireland as an Organised Hypocrisy is in lots of company
Dr Peter Morici: Friday’s US jobs report won’t alter Fed plans to raise interest rates
Own Goal: Could FIFA have picked worse World Cup hosts?
Ireland: Spin and spending will not save bewildered Coalition
Irish Government parties set for 2-year vote buying spending spree
European Parliament: Vote No. 1 for Diarmuid O'Flynn in Ireland South
Dr Peter Morici: US April jobs report may show 215,000 added in April
Dr Peter Morici: Hardly time to call Obamacare a success
Celtic Tiger RIP: Change in conservative Ireland six years after crash
Dr Peter Morici: Five things to know about the Fed’s obsession with inflation
In age of acronym/ Google, Trinity to rebrand as 'Trinity College, the University of Dublin’
Hoeness case part of ‘painful’ change for Swiss bankers
Dr Peter Morici: The Cold War was only on vacation
Dr Peter Morici: US economy drags on Obama's approval ratings; Don’t look for changes in Washington
Dr Peter Morici: Bitcoin debacle shatters the myth of virtual money
Dr Peter Morici: US Tax Reform: Eliminate the income tax and IRS altogether
Wealth threatens the simple life in Gstaad, Switzerland
Irish journalists get cash payouts over 'homophobic' defamation claim
Irish academics get lavish pension top-ups as private pensions struggle
Dr Peter Morici: Inequality is President Obama’s highest priority, but solutions are naive
The Finfacts Troika: Better times ahead and a hangover to forget?
Dr Peter Morici: Volcker Rule arrives with the hidden jewel in Dodd-Frank financial reforms
Ireland's toothless fiscal watchdog threatens to bark
Analysis: Germany's current account surplus - - Part 2
The end of western affluence?
Bono's hypocrisy on Africa, corporate tax avoidance in Ireland
France like Ireland is run for the benefit of the old