Thanks to year-over-year declines in manufacturing orders, manufacturing shipments, and wholesale sales, along with bloated inventories, apologists for the current condition of the U.S. economy are down to three defenses supposedly demonstrating that all is still really well after yet another rough first quarter (once again excused away as due to supposedly historically awful winter weather).
One of the three is that the housing market, particularly for new homes, is in a genuine recovery. Effective today, we can scratch at least the new-home element of that claim. The Census Bureau told us today that seasonally adjusted new-home sales fell by 7 percent in June, after May's originally strong figure was also revised down by 5 percent. The raw data showed that the number of new homes sold in June — supposedly peak season for new home purchases — was the same as the number sold in February.
These devolopments brought forth predictable appearances of the "U-word" ("unexpectedly") at Bloomberg News and Reuters, while the Associated Press did its level best to make yet another report presaging a disappointing summer in the making (arguably 5 of the last 6 in the new-home market) look like a one-off.
The AP's Josh Boak rolled out an especially pathetic excuse, in essence claiming, "Hey, new-home sales aren't doing so well, but existing-home sales are fine, so cool the pessimism." Even with the new-home market at maybe two-thirds of what anyone would see as an acceptable level, he's apparently not kidding.
Boak's lead paragraph also tried to convince readers that the market for new homes is still hot, just "not as hot" as once thought:
US NEW-HOME SALES HIT JUNE SLUMP
Fewer Americans bought new homes in June, a possible sign that the real estate market might not be as hot as it appeared at the start of summer.
The Commerce Department said Friday that new-home sales slumped 6.8 percent last month to a seasonally adjusted annual rate of 482,000. The report also revised May sales down to a rate of 517,000 from 546,000.
The June slowdown indicates the potential limits of the earlier momentum. A nearly two-year hiring streak and low mortgage rates had been spurring stronger sales through much of the year.
Actually, Josh, as seen below, raw sales were as cold as they were during February's wintry weather, in contrast to every year from 2010 through 2014, when June sales were, as would be expected, significantly higher than February:
Boak's blather about hiring takes us to the second of three pillars of the economy's apologists. They claim that job gains are supposedly "robust." Besides being not true in long-run, workforce-adjusted historical terms, the problem is that the employment gains aren't doing a lot for real, inflation-adjusted household income. Sentier Research's latest release on that metric today showed a decline in household income in June, and that it's still about 4 percent below where it was in early 2008.
Continuing:
... Some analysts downplayed the report as representing a sliver of the real estate market.
"While the June report is disappointing, new-home sales represents a small portion of total home sales (just 8 percent)," said Bricklin Dwyer, an analyst at the bank BNP Paribas.
So I guess we can stop worrying if new car sales go in the tank as long as used cars are still selling. Sure, Josh. This looks like yet another attempt to define a "new normal," this time involving a permanently diminished new single-family home market.
Boak also leaned on the fact that the inventory of new homes, expressed in number of months' sales, is still very low. Well, one of these days the press is going to investigate what I have heard from several sources, namely that builders in many and perhaps most areas of the country are still not building "spec" homes, but are instead, thanks to lenders' restrictions largely driven by Dodd-Frank, only breaking ground when they have a committed buyer. These reporters need to leave their offices — or at least get in contact with people other than their favored sources — and let us know how widespread this practice is.
The third apologists' pillar is that consumers are supposedly still consuming. That contention also became shaky recently when June retail sales came in with a seasonally adjusted decline accompanied by even worse underlying raw data.
All in all, every summer during the Obama administration, with the exception of last year — which still didn't feel as prosperous as the GDP figures would have had us believe — has been horribly disappointing. Summer 2015 looks like it will be no exception.
Cross-posted at BizzyBlog.com.
