Positive
economic reports last week indicated U.S. factory output rose 8%, building
permits jumped 7.7%, 29 of 30 large banks passed their stress tests,
Philadelphia area showed very strong economic strength, and jobs continued to
strengthen.

Some
negative data was reported:  existing
home sales were down in February (weather?), housing starts sunk (weather?),
and National Assn of Home Builders sentiment declined (weather?).

In
summary, manufacturers have built up inventories hoping consumers will spend abnormally
high amounts in the spring.  We will
monitor how well consumers spend and report to you in upcoming issues.

Last
week’s Economic reports indicate the economy is heating up as well as the
temperature.  This is evidence of the
anticipated manufacturing ramp-up to produce the goods consumers may buy when
the weather improves.  Last week, good
reports came from employment/jobs, from manufacturing activity, and from
personal income levels.

One
negative economic report last week indicated productivity came in at a lower
level than expected in the 4th Quarter, 2013.  I expect this to be a temporary
situation. 

Economic
data released last week was mostly negative. 
Housing sales and housing starts both fell in January.  Economic activity in the Philadelphia region
(normally, a bell-weather for the entire U.S) declined in January.  On the positive side the number of employed
individuals in the U.S. has climbed to a pre-recession high.

The numbers have been
influenced by bad weather.  Many economic
experts expect the economy to pick up with improved weather.  Manufacturers will ramp up in anticipation of
a strong rebound in consumer spending. 
We should see the manufacturing sector pick up steam in the next few
weeks

Economic
data indicates a slowdown of activity. Especially hard hit:  retail sales activity including Auto sales.  Leaders within many other industries are
indicating the same.  Part of the slowdown
is weather related-the exact amount is unknown.

But,
I believe we have to go beyond the numbers. 
There is some underlying strength in the US economy.  Manufacturing and employment data has held up
well in light of the above.  And, here is
an update on the very important housing
sector based upon data released last week: Inventory
is still very low, and with the low level of inventory, there is still upward
pressure on prices.  If inventory doesn’t
increase prior to the spring busy season, prices will probably increase a
little faster than expected (a key reason to watch inventory right now).

Economic
data indicates a slowdown of activity.  Many
business leaders are indicating the same. 
Part of the slowdown is weather related. 
We will remain vigilant to watch how the economy behaves when better
weather returns.

Meanwhile,
here is an update on the very important housing
sector based upon data released last week: Inventory
is still very low, and with the low level of inventory, there is still upward
pressure on prices.  If inventory doesn’t
increase prior to the spring busy season, prices will probably increase a
little faster than expected (a key reason to watch inventory right now).

Harsh winter conditions in many parts of the U.S. has reduced the confidence of consumers and home builders, creating a mixed picture of the U.S. economic activity.  Meanwhile, jobs data and business activity level continue to improve.  Distressed sales of residences declined (a sign of improvement) and housing inventory declined.  Inflation remains low except in nat gas and propane in the Midwest and Northeast. 

In the past, a weather related lull in consumer confidence typically was followed by a pickup in confidence.  This uptick could be timed with a robust spring real estate market to create a strong bounce back economy.

Recent reports on construction spending
signaled continued strength in both residential and nonresidential investment, which
are key components of GDP, although we may see a temporary set-back when the
data is released for January due to difficult weather conditions in many parts
of the U.S.

The purchasing managers’ index—strong
orders, lean inventories, and a rise in employment to a 30-month high—also indicate
a good first-quarter 2014.

Mind the tax hikes instituted last
January (2013) will not be repeated this January. The economy grew faster in 2013
despite those higher taxes; thus, the relative absence of a tax shock this January
bodes well for 2014.

More
“positive” than “negative” economic reports were released during the last 2
weeks indicating the U.S. economy continues to show improvement.  New home sales, stronger payroll data, higher
level of manufacturing & construction, lower trade deficit, and stronger
consumer sentiment all pointed toward the “positive” direction.  And, the 3rd quarter Gross
Domestic Product (an approximation of the U.S. economic output) came in at 3.6%
annualized increase versus a 3.1% expectation. 

On
the negative side, interest rates moved higher thus reducing the number of
refinancing of home mortgages. 
Additionally, a significant increase in inventories occurred – consumers
need to buy these products sitting on the shelves in order to keep the economic
ball rolling forward.