Sales of new one-family houses were at a seasonally adjusted annual rate of 309,000 in January, a rate down 10.2 percent from December 2009 and at only about half that recorded in January 2008. There were 342,000 homes for sale at the end of January; this represents 13.3 months’ supply at the current sales rate. None of this should come as any particular surprise, but it is still bad news, the worst being the more-than-a-year's overhang of unsold houses. Long ago, economist John Maurice Clark identified residential construction as one of the strategic sectors in understanding the business cycle and a sluggish, over-supplied housing market is certainly bad news for that sector.
New orders for manufactured durable goods decreased 5.2 percent to $163.8 billion in January. This was the sixth consecutive monthly decrease and represented an accelerated dive from December's figures. Again, this is the bad news we expected from the hardgoods industries.
With two more "zeros" added in, our diffusion index of good versus bad economic news now stands at 22.2 percent good for February. The only indicator left is a revision of the fourth quarter GDP numbers and that will only tweak the bad news we got at the end of January. Still, the good news index (GNI) will have edged up from last month.
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