Ian Shepherdson
Ian Shepherdson
Ian Shepherdson is an award-winning British economist. He is the founder and Chief Economist of Pantheon Macroeconomics, an economic research firm located in Newcastle, England, with an office in White Plains, New York. In February 2015, he was named The Wall Street Journal's US economic forecaster of the year for the second time, having previously won the award in 2003...
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Our view is that home sales will slide through the summer, dragging housing starts down into the fall. But this is still no more than a forecast; mortgage applications are still very strong.
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Output will not immediately accelerate to the pace suggested by the orders numbers ... because companies are still aggressively running down inventory.
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Just about everyone who buys a house uses a mortgage, so a sustained drop in mortgage demand tells you where home sales are going, regardless of the current sales data.
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July sales always looked unsustainably high relative to the level of mortgage applications so a correction was due. This drop in sales does not mark the start of a sustained weakening.
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It is disappointing in the wake of the huge rise in the Empire State survey -- the indexes are usually at similar levels,
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Manufacturers are still miserable, and output will keep falling for some time, but they can now see light at the end of the tunnel, ... They are working off their excess inventory ... and are now hopeful of stronger orders by the year-end.
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Katrina and Rita effects still linger, though they are fading, ... Claims will likely rise next week as the full effects of Wilma hit, but the downward trend is very clear.
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Most notable was the leap in the prices-paid index, ... this is simply a reflection of higher oil prices but it may not have been fully anticipated in the markets.
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People have plenty of cash - and the inclination to spend it,
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Looking forward, we think there is next to no chance these numbers mark the start of a real slowing in consumer spending. The markets will no doubt take comfort from the headlines, but it is temporary relief.
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Looking forward, we can be unequivocal: New home sales have to fall, because the level of demand for new mortgages for house purchase recently has not been sufficient to sustain current sales rates.
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Looking forward, downside risks remain, and there is clearly no bar on further easing,
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The price index was up, ... This reflects the rise in oil prices and not much else, but that won't stop doom-mongers worrying about it. In short, the report shows manufacturing is still on track.
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Unfortunately, at current levels, and coupled with the extraordinarily low level of labor demand, the claims numbers are still consistent with flat or falling payrolls and a rising unemployment rate. There's no real relief in sight here yet.