Homebuilders Perk Up

Even homebuilders are feeling a little more optimistic these days, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index, which was released on Wednesday.

Even homebuilders are feeling a little more optimistic these days, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index, which was released on Wednesday. The index, which gauges builder confidence, was up two points in December from November’s tally of 21. That’s the highest the index has been since the spring of 2010, during the brief economic upswing of that time that didn’t ultimately get any traction.

That isn’t to say that homebuilders are robustly optimistic (which would be a tally over 50), since it’s been at least half of a decade since that was true. Yet each of the three component indexes saw a third consecutive month of improvement in December. Current sales conditions rose two points in the latest month to 22, while the component gauging sales expectations in the next six months edged up one point to 26. The component describing traffic of prospective buyers gained three points to 18, which is its highest level since May 2008.

“This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend,” NAHB chief economist David Crowe noted in a statement. “While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months.”

PPI stagnant for now

The U.S. Producer Price Index wasn’t expected to move much last month, and it didn’t. In December the PPI for finished goods was down 0.1 percent, following an uptick of 0.3 percent in November. Compared with December 2010, the PPI for finished goods was up 4.8 percent, the lowest year-over-year increase since January 2011.

As usual, however, the volatility of energy and food changed the direction of the monthly PPI. Without those important but “non-core” categories, the PPI would have gone up 0.3 percent. Both food and energy prices dropped 0.8 percent in December, with the decline in energy led by natural gas, not gasoline.

Now that broader inflation seems to be caged, the real concern (again) is gasoline prices, which still represent a wild card in the economy, especially during the upcoming summer driving season in the United States. Even without a choking of the Straits of Hormuz by a petulant Iran, some analysts are predicting gas at over $4 a gallon this summer, or at roughly summer of 2008 levels, which affected other retail spending on the downside.

Nervousness about Greece

As of Wednesday evening, the next round of bailout money for Greece hung in the balance, as the Greek government and its creditors met about a bond swap deal without coming to a conclusion. The two sides agreed to meet again on Thursday, however, raising hopes that they might strike a deal. At issue is how much of a haircut the creditors would be willing to take in the form of bonds of lesser value exchanged for those that they already hold. The Greek government wants a 50 percent haircut and an interest rate of less than 4 percent on the remaining debt; naturally, the lenders are less than enthusiast about those terms.

If the deal isn’t done soon, the Greeks will not receive their next round of bailout dosh from the EU and the IMF in March, and will surely default. There’s even talk of an “orderly default” by Greece, which could be akin to trying to organize an “orderly avalanche,” considering the nervous exhaustion generally felt by investors these days.

Wall Street wasn’t overly concerned with the euro-zone’s problems on Wednesday. The Dow Jones Industrial Average rose 96.88 points, or 0.78 percent, while the S&P 500 Index gained 1.11 percent and the Nasdaq climbed 41.63 points.