Manufacturing, Housing Come In Surprisingly Strong, Weak

The bad news: according to government statistics, new home sales (pdf) were weaker than expected in November, falling 9% (give or take 14% (yes, 14%)) from October's level.

The good news: the Chicago PMI (a private survey of midwestern manufacturing conditions) came in at 56.6 for December, way ahead of the expected 52.0 and up from November's 52.9.  When the indicator is above 50, it signals expansion.  When it's above 50 and rising, it signals accelerating expansion.

In January, we'll get a look at the national manufacturing data, and if it's anything like the Chicago number, it will strongly suggest that rumors of recession (and even the scale of the slowdown) have been greatly exaggerated.

The housing slump appears to have deepened and that's a bummer.  But the recessionary nailbiting is predicated on the idea that credit and housing market troubles will bleed over into other sectors of the economy and grind it into contraction.

Today's surprisingly strong report of accelerating manufacturing expansion (and last week's surprisingly strong report of rapidly accelerating consumer spending) tend to argue against that premise.  The remarkable resilience being observed doesn't guarantee a recession-free economic cycle, but it does suggest the current level of fret is unwarranted.

With this latest bit of economic data in place, I'll go ahead and make the year-end prediction that fourth quarter GDP growth comes in at 2.0% or better.