11/16/2011
By David Urani, Research Analyst

The feel-good momentum in housing is somehow continuing, as the November Housing Market Index rang in a reading of 20 versus 17 last month. That implies that homebuilder confidence is the highest since May last year. During prime spring selling season and the federal tax credit. Traffic of prospective buyers was also listed as the highest since May. Relatively speaking a reading of 20 is still low for the index, but at the same time we have to take some encouragement out of the idea that it is the best result since the recession if you exclude the artificial bump from the federal tax credit program.

I like the way sales trends have been shaping up, although the one big concern I continue to have is the fact that there have been signs that frozen foreclosures, particularly the ones from the robo-signing scandal, are thawing out.  We will have our fingers crossed that we can make it through the winter without seeing a significant increase in distressed inventories.

Industrial production rose by 0.7% in October and that was better than the 0.4% consensus estimate. That was a nice boost from the 0.1% drop in September. The rise was attributed to a 2.3% increase in mining and a 0.5% increase in factory output. Capacity utilization rose up to 77.8% from 77.3%, and at these levels, it is the highest since August 2008.

The good news is that the increase in capacity utilization doesn't seem to be causing inflation, according to yesterday's producer price index which came in soft. It also has positive implications for employment. However, looking at the cost of crude today which is now above the $100 mark, one would think that higher prices will begin to come into the picture.

David Urani
Wall Street Strategies