Summary for Week ending March 1st

It was interesting week. In testimony to Congress, Fed Chairman Ben Bernanke made it clear he will keep the "pedal to the metal" with monetary policy. Meanwhile, Congress keeps tapping on the fiscal policy brakes, this time with "sequestration" budget cuts.

However, even with conflicting policy, the economy is doing OK - at least so far in 2013.

New Home sales in January were at the highest level since July 2008, auto sales were up again in February, the ISM manufacturing index for February was at the highest level since June 2011, weekly initial unemployment claims declined, and consumer sentiment increased. All were better than expected, and it appears the economy was improving before the sequestration budget cuts on March 1st - even with the payroll tax increase this year (although personal consumption expenditures were only up slightly in January).

Also Case-Shiller reported that house prices were up 6.8% in 2012 and finished the year strong. This year-over-year increase strongly suggests house prices bottomed in early 2012.

The ongoing housing recovery and solid auto sales (both leading indicators) suggest the economy will continue to grow for next few years. 

Here is a summary of last week in graphs:

' New Home Sales at 437,000 SAAR in January

Click on graph for larger image in graph gallery.

The Census Bureau reports New Home Sales in January were at a seasonally adjusted annual rate (SAAR) of 437 thousand. This was up from a revised 378 thousand SAAR in December (revised up from 369 thousand). 

January is seasonally the weakest month of the year for new home sales, so January has the largest positive seasonal adjustment. Also this was just one month with a sales rate over 400 thousand - and we shouldn't read too much into one month of data. But this was the highest level since July 2008 and it is clear the housing recovery is ongoing.

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale was just above the record low. The combined total of completed and under construction is also just above the record low.

This was above expectations of 381,000 sales in January. This is the strongest sales rate since 2008. This was another solid report.