Almost every day a major government agency or private organization releases new information covering the status of some pocket of the economy.
Let’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 increased 4.4% in December to an annual rate of 1.089 million, while building permits for single-family homes rose 4.5%. Housing starts for fiscal year 2014 were up 8.8%.
The Bottom Line: While the housing market remains unpredictable, low mortgage rates are starting to encourage U.S. consumers to break ground on or purchase new homes. So the increase in housing starts and building permits is an encouraging sign that we may see a robust spring season.
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 ended January 17, jobless claims fell by 10,000 to a seasonally adjusted 307,000 annual rate. Economists were expecting 300,000 new claims. For the week ended January 10, claims were revised up to 317,000 from the originally reports 316,000. The four-week moving average is now at 306,500.
The Bottom Line: Jobless claims have been above the 300,000 threshold for three weeks now, which is causing some concern that improvement in the job market is slowing. However, it is not unusual to see jobless claims rise early in the year, after companies lay off holiday help and dismiss temporary employees. Even at the current rate, jobless claims remains near historic lows.
Existing Home Sales
What It Measures: The report is a good indicator of activity in the housing sector. Aside from total sales, two other indicators are worth watching in this report: the inventory of homes for sale and the median price.
The Breakdown: The National Association of Realtors announced this morning that existing home sales increased 2.4% in December to a 5.04 million annual rate. This was slightly lower than economists’ projections for existing home sales to rise to a 5.06 million annual rate.
The Bottom Line: Again, lower mortgage rates and easing lending standards appear to be helping the U.S. housing market recover.
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, building 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 increased 0.5% in December, after rising 0.4% in November and 0.6% in October. This beat economists’ expectations for a 0.4% increase.
The Bottom Line: This was the fourth-straight gain for the Conference Board’s leading economic index, and that bodes well for the health of the U.S. economy.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family 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.
