The media report that the stock market rallied yesterday in response to the good economic news released that day. It cited the release of new data on durable goods orders and new house sales. I wonder if I was looking at the same reports. The Commerce Department's data did show better than expected durable good orders in March, but this was following very weak reports in January and February. Year over year, durable good orders are still down by more than 3 percent in nominal terms. Real equipment investment for the first quarter is likely to show a drop of close to 10 percent. Against a backdrop of serious weakness, a better than expected month is always good news, but it seems a bit excessive to make too much of this very erratic data. The other cause for celebration was a 22,000 increase in the rate of new home sales in March, measured against a downwardly revised February level. The basis for the celebration here escapes me. The consensus forecast was for a considerably larger bouceback from the weak February level. Even with the uptick, March sales were the slowest since the recession, excluding February. And the small uptick was almost certainly driven by weather, with the Northeast and Midwest showing gains (following harsh Februaries) and the West and South showing further declines.
--Dean Baker