5 Headlines Indicating U.S. Economic Strength

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How can investors keep up with the state of the U.S. economy? Almost every day a major government agency or private organization releases new information covering the status of some pocket of the economy.

Weeklys Can Offer a Better Way to Play the NewsLet’s work together to help you sift through the barrage of economic data out there and determine what this will mean for your stocks.

Here’s what you need to know about the latest headlines:

Housing Starts & Building Permits

What It Measures: Homebuilders apply for building permits and begin construction on residential units only when they are confident that these units will be sold. As a result, these figures are a great indicator of the direction of the housing industry. An increase in housing starts and building permits usually occurs a few months after a reduction in mortgage rates.

The Breakdown: Housing starts slipped 2% in January to a seasonally adjusted annual rate of 1.065 million. Building permits also dipped, falling 0.7% last month. Despite the pullback, housing starts were actually up nearly 19% year-over-year.

The Bottom Line: The dip in housing starts and building permits is likely due to the bitter cold temperatures that have gripped much of the United States so far this year. Once temperatures rise, we’ll likely see the housing market continue to recover.

Producer Price Index

What It Measures: This is the price of goods at the wholesale level for the past month, and a first sign of inflation.

The Breakdown: The Producer Price Index dropped 0.8% in January, due mainly to a 10.3% plunge in energy goods prices and a 24% drop in the gasoline index. Food prices slipped 1.1% last month. And excluding food and energy, prices only slid 0.1% in January.

The Bottom Line: With the January decline, the U.S. Producer Price Index is now flat year-over-year. With low oil prices, inflation remains well in check, though there is now the threat of deflation if prices continue to fall.

Industrial Production

What It Measures: The index of industrial production measures the amount of output from the manufacturing, mining, electric and gas industries—several huge industries that literally power our economy. Manufacturing production, the largest component of the total, is derived from using the manufacturing hours worked from the employment report.

The Breakdown: Industrial production bumped 0.2% higher in January, while December was revised to a 0.3% decline (down from the previous 0.1% dip). Capacity utilization remained steady at 79.4% last month. Economists were looking for industrial production to expand 0.4% and capacity utilization to come in at a 79.8% rate.

The Bottom Line: This is the latest sign that U.S. industrial production has cooled off in recent months. Still, overall industrial production was up 4.8% year-over-year in January.

Initial Claims for Unemployment

What It Measures: It is an indicator of the direction of the job market. Increases in jobless claims show slowing job growth; decreases in claims signal accelerating job growth. On a week-to-week basis, jobless claims are volatile, so one of the best ways to track this measure is to look at the four-week moving average. It usually takes a jump or decline of at least 30K claims to signal a meaningful change in job growth.

The Breakdown: For the week ending February 14, jobless claims fell 21,000 to a 283,000 annual rate. This surpassed economists’ projections for jobless claims to drop to 293,000 last week. The four-week moving average also slipped, falling to 283,250.

The Bottom Line: In the past three months, the U.S. economy has added more than a million jobs—a level we have not seen since 1997. So improvement in the U.S. labor market continues to accelerate.

Index of Leading Economic Indicators

What It Measures: This is an index that compiles all of the economic indicators, including jobless claims, money supply, new orders, housing permits and stock prices. It is a broad measure that is a good predictor of patterns in the economy.

The Breakdown: The Conference Board’s leading economic index rose 0.2% in January, while December’s figure was revised to a 0.4% gain, down from the previous 0.5% increase. Economists were looking for a 0.3% increase last month.

The Bottom Line: The index was weighed down last month by declines in building permits and factory orders. However, this was the fifth-straight gain for the leading economic index, and that still shows the U.S. economy is still in good health.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


Article printed from InvestorPlace Media, https://investorplace.com/2015/02/economy-u-s-economy-housing-producer-price-index-industrial-production-job-market-job-growth-jobless-claims/.

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