KEY DATA: Sales: -6.6%; Over-Year: +9.1%; Prices: +15.8%/ CFNAI: -1.84 points
IN A NUTSHELL: “Oh, well, just another set of ugly, weather-driven economic numbers.”
WHAT IT MEANS: The scratched record keeps skipping and so, once again, I have to report that the economy faltered in February. Existing home sales tanked falling sharply in three of the four regions. Only the West, which really didn’t suffer that much from bad weather, managed to post an increase in demand. Yet as bad as things were, home demand was still up sharply from February 2020, which was the last number before the pandemic crushed the economy. That shows how truly good conditions are. There is a cautionary sign in the report. Inventory remains almost nonexistent, having declined by almost thirty percent since the previous February. At the current sales pace, there is only two months of supply, about one-third what it should be in a healthy market. As a consequence, prices continue to soar.
The Chicago Fed’s National Activity Index, an all-encompassing, 85-indicator monthly measure, fell massively in February. It went from strong growth to strong contraction. Fifty-one of the indicators subtracted from the overall index. Better weather should lead to a large rebound in this index in March.
IMPLICATIONS: February may be gone, but it is hardly forgotten. The economic data are flowing in and the latest reports were as ugly as most of the previous ones. And there will be more to come. But April, come she will (thank you, Simon & Garfunkel, for that) and when the March numbers start appearing, they should look really, really good. Still, it may not be until the April reports are released before we really start seeing the major impacts of the stimulus funds on economic activity. Households have been acting fairly responsibly, paying bills, reducing debt and saving, rather than shopping like crazy. But stronger spending is coming, and the spring numbers will tell us how quickly the money is being put to use. So, do as I suspect investors are doing when they see a bad February report: Look at the headline and move on.