Today's Bloomberg headline read thus: US Durable Goods Orders Unexpectedly Climb in Sign Recession is Easing. Again there is a story of green shoot sprouting. Unfortunately we continue to hear intermittent stories of green shoots and rising stockmarkets only to be pulled back to the depth of despair after a new set of bad news invade the market and the stocks tank. All of these events leave me wondering as to whther these are simply straws that are painted green and everybody is trying catch onto some straw or the other hoping that things would turn around soon.
The previous green shoot seemed to be sudden improvement in exsiting home sales number via-a-vis expectation.
Existing-home sales (reported yesterday) fell 3.6% from May 2008. Sales in May 2009 rose 2.4% from April to 4.77 million. Fact, however, is these are not strictly comparable since we are trying to compare revised to unrevised numbers. Once again, the prior monthly number was revised downwards (4.68 million down to 4.66 million). However, today is a different day and a different home sales number emerged. Purchases of new homes in the U.S. unexpectedly fell in May as builder discounts failed to keep pace with the foreclosure-driven slump in prices for resales. Sales decreased 0.6% to an annual pace of 342,000 after a revised 344,000 rate in April that was lower than previously estimated. Fact is without bigger price cuts, builders may keep losing market share as the unemployment rate and foreclosures climb, aggravating the drop in resale prices. The recent jump in mortgage rates may hurt demand even more, threatening to undermine the stabilization in construction that’s emerged so far this year.
Clearly we are trying to catch onto some straw to make us feel good. One should brace for more bad news to come.