Tuesday, June 16, 2009

Summary of our view on today's economic indicators

Housing data, which included an update on permits, housing starts and housing completions, were too good to be true. This data may be positive for residential construction companies, but it is bad news for the housing mkt as it will increase inventory, as we mentioned in our initial analysis.

Consensus Actuals

Housing starts: 485K 532K
Housing permits: 500K 518K

PPI was significantly below the consensus. It appears that even the significant increase in energy costs that we have seen during the past two months, was not enough to offset low demand and indicate any type of inflation. We continue to believe that we will face severe inflation during the next 1 - 3 years as the govt continues to print cash to combat the economic downturn.

Consensus Actuals
PPI: 0.6% 0.2%
Core PPI: 0.1% -0.1%

Industrial production was slightly below expectations with capacity utilization in line. The 1.1% monthly decline, which was slightly more than expected, mainly due to the fall of the auto industry. Decline in industrial production may have stabilized, but we believe it all depends on a recovery in consumption, which we do not expect until late Q4. For this reason, similar to the housing data, we might be questioning inventory mgmt conducted by non-auto producers of finished goods.

Consensus Actuals
Production: -1.0% -1.1%
Capacity utilization: 68.1% 68.3%

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