February housing starts were released this morning and they were pretty terrible. Expectations were for starts to come in around 1.048 million. Instead, housing starts came in at a paltry 897K. Housing starts are now at the level as they were in January 2013.
The recent move higher in longer dated US treasury bonds has been sharp and fast and has caught plenty of people off guard. The 10-year bond yield has moved from 1.68% to 2.12% while the 30-year has moved from 2.25% to 2.72% in a little over a month.
World import and export prices finished 2014 with the largest year-over-year decline since 2009 according to the CPB world trade monitor. Export prices declined by 9.2% YoY% and import prices declined by 8.8%. No area in the world escaped the deflation in trade prices as the decline in prices was broad based.
US existing home sales fell by 4.9% in January to 4.82 million. This is the lowest level since April of last year. The western region remains by far the weakest region while the south remains the strongest. Months supply remained relatively steady at 4.7 months worth of supply in the market.
The price of the all important copper appears to be heading lower once again after what in retrospect looks like a dead cat bounce.
One of the main features of the current recovery is the drop in the potential growth rate. In every other recovery since WW2, real GDP has risen back to potential as the recovery got going, thereby closing the output gap. This time around, the output gap has narrowed because potential GDP has been revised down.
The latest data (November) out of the US Department of Transportation for miles driven on US roads shows that more miles were driven on an annualized basis in November than in any month since July 2008.
The last time 10 year TIPS derived breakeven inflation was this low in the autumn of 2010, lumber was around $200/ft. The break in inflation expectations since last August suggests lower lumber prices are ahead.
As we noted earlier this week, banks have significantly underperformed to start the year.
While the collapse in the price of oil has grabbed the headlines, the weakness in the price of copper continues to pique our attention.