US Confidence And Housing Numbers Surprisingly Strong

[DailyFx]

With fears that the US recession is a near certainty for the second half of the year, today's data has supports two of the economy's most important and hardest hit sectors - the consumer and housing sectors. Little was expected from the University of Michigan's sentiment report as it was a revision for July's preliminary reading. However, the drop in gas and food prices as well as the stabalization in equities and jobless claims clearly had an impact in leading the indicator to a sharp upside change to 61.2 from the 56.6 reading initially reported. This was a significant reversal from an intially reported 28-year low and three-month high in its own right; but the true improvement comes from the details. The economic outlook component of the indicator hit a five momth high while the one-year outlook for inflation pulled back from the initially reported recent record 5.3 percent forecast was instead left at 5.1 percent to match June.

From the severely depressed housing market, the new home sales report outperformed expectations of a steady decent into the residential market's worst recession in decades. However, the numbers were better than what was initially suggested with the forecasts. While purchases of previously unoccupied homes slipped 0.6 percent, the contract ion was far less than expected and was further produced by a strong, positive revision to the previous month. Overall sales through June ran at a 530,000 annualized pace - much better than the 503,000 expected and the 512,000 of the intial reading from May. Further boosting confidence was the biggest drop in inventories in nearly 40 years thanks to inventives and steadily reduced prices. In fact, the median home price actually fell 2.0 percent on an annual pace to $230,900. On the other hand, optimism from this data should be restrained as sales have contracted 10 of the past 12 months. What's more, the new home sales report - while considered a leading indicator - is not a good barometer for the overall housing market as it accounts for only 15 percent of the overall market and largely reflects the influences of short-term factors like discounts and incentives. - John Kicklighter, Currency Analyst for DailyFX.com