Once again, it’s too close to call.
The latest batch of economic data released so far this week suggests there’s reason for hope. Sort of. Maybe. Perhaps.
Let’s start with construction spending, which rose by 0.2% in March, the Census Bureau reported on Monday. That’s the second monthly rise in a row, reversing what had been a year of declines or virtually unchanged reports on construction spending. Unfortunately, on a rolling 12-month basis, the ship is still sinking. The 2% drop in construction spending in March compared to a year earlier is one of the sharpest declines in recent history, second only to January’s slightly bigger stumble.
Rather, the obvious good news on Monday was the fact that disposable personal income continued rising in March. In fact, March’s numbers show that income advanced by 0.7%, among the stronger paces in recent history, the Bureau of Economic Analysis advised. Alas, Joe Sixpack seemed reluctant to spend that windfall. Personal consumption expenditures rose by only 0.3% in March, a fairly middling reading of late, and down sharply from February’s 0.7% surge.
On Tuesday, more hope arrived by way of the ISM Manufacturing Index, which rebounded to 54.7 in April, the highest in nearly a year. The rise suggests that the weakness in manufacturing in recent months is giving way to a return to growth. Indeed, a reading above 50 implies growth; below 50, contraction. As such, the dip below 50 in January conveyed the notion that the economy was set for a stumble. But to the extent that the ISM Manufacturing gauge is relevant, a rebirth appears to be in the air. For the past three months, the index has been above 50.
That brings us to today’s number du jour: new factory orders for March, which rose 3.1%, , the Census Bureau reported. That’s stronger than February’s 1.4% rise, suggesting momentum, at least for the moment. In fact, new orders for manufactured goods have risen in four of the past five months.
But the latest rise in factor orders may be less than it appears. David Resler, chief economist at Nomura Securities in New York, writes in a note to clients today that “most of the increase was attributable to higher oil prices, which boosted non-durable goods orders, and another big gain in aircraft demand, which underpinned much of the increase in durable goods orders.” But in a sign of the times, there’s a competing view available for your consideration. The gain in orders for durable goods, he continued, were “more broadly based than in recently months and could be a sign that the slump in capital spending was merely transitory.”
Yes, the economic outlook may be too close to call, but the clues continue to pile up. One day, perhaps soon, the truth will out and even the man on the street will have confidence about what’s coming. For now, just keep watching the bouncing numbers.