Tags: Morningstar | Robert Johnson | Warmer Weather | Economic Spring

Morningstar's Robert Johnson: Warmer Weather May Not Prompt Economic Spring

By    |   Tuesday, 25 March 2014 01:13 PM


Those expecting the economy to bloom like spring flowers as cold weather retreats may be disappointed, writes Robert Johnson, Morningstar's director of economic analysis.

Recent economic indicators have been open to interpretation, he notes. For instance, housing permits look good on a month-to-month basis, but weak compared to last year's.

In any case, no report points to anything resembling a booming economy. Optimists thinking spring weather will kick start the economy should know that weather-induced good news might not show up for months, perhaps not until summer, due to standard lag patterns.

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Even that is questionable, Johnson says. The housing market and car sales would need to jump up sharply to energize a robust recovery.

"With the possible exception of the Affordable Care Act, there is nothing else big enough on the horizon that can really get the economy moving again."

Existing-home sales are not getting better, but at least they're not getting worse. Single-month sales fell from an annualized 4.62 million units in January to 4.60 units in February, substantially down from 5.38 million in July 2013, he says.

"A drop of 14 percent in unit sales in the middle of a recovery is more than a little disconcerting."

Housing permits look good on the surface with 1.02 million units in February compared to 945,000 the previous month. Closer examination shows the increase was mostly for less expensive multifamily units, which add less to GDP growth.

Homebuyer traffic at model homes is down, which doesn't bode well for this year's housing market, he adds. "Home shopping isn't something that can really happen on the Internet. Without visits, there cannot be sales."

Tim McCausland, chief strategy officer for Middletown, NY-based Orange County Trust Co. predicts that, like spring, the economy will rebound slowly. There are signs of hope, he notes in an article for the recordonline in the Hudson Valley.

He also sees potential pitfalls. Consumer confidence has improved, community banks report more commercial lending, and car sales are strong,

"An important factor for the growth (or not) of our economy in 2014 is the polar vortex affectionately known as the American Congress. With midterm elections this fall, Congress will likely fall into another political scrum that makes the likelihood of substantive and positive change for the economy quite low."

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Those expecting the economy to bloom like spring flowers as cold weather retreats may be disappointed, writes Robert Johnson, Morningstar's director of economic analysis.
Morningstar,Robert Johnson,Warmer Weather,Economic Spring
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2014-13-25
Tuesday, 25 March 2014 01:13 PM
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