Following Monday's better-than-expected NAR existing home sales report, Tuesday's US data was surprisingly strong. First, the Federal Housing Finance Agency reported that prices for homes purchased in January rose 1.7 percent, the first increase in eleven months. The index had been anticipated to fall 0.9 percent, and the increase adds to evidence that the seeds for recovery in the housing sector may have been planted. However, given the deteriorating labor market situation, a true rebound may not be possible until the US recession ends.
Meanwhile, the Richmond Federal Reserve's index of manufacturing business activity jumped to a 6-month high of -20 in March, a significant improvement from the reading of -51 we saw in February. A breakdown of the Richmond Fed report shows that shipments, new order volumes, order backlogs, capacity utilization, number of employees, average workweek, and wages all increased during the same period. That said, all of these components remain negative, indicating that activity and conditions are still contracting, albeit at a slower pace.
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