This past week, Hurricane Sandy's destructive powers swept their way through a series of US reports, including new home sales, personal income, November same-store sales, and October consumption figures, rendering them nearly useless.
Further complicating matters, personal income data was revised sharply downward all the way back to April, along with consumption data for August-September. Then there is the violent up-and-down swings in auto production (at least, according to government data) that took 0.5% of third-quarter results. Did I mention that US gasoline prices have been acting like a giant yo-yo, too?
Unfortunately, the data is likely to remain muddled for at least another couple of months. The next piece of storm-addled data is likely to be the upcoming employment report for November, which could show some significant effects from Sandy. In fact, one can't rule out the possibility that we might potentially lose jobs in November, and October numbers could be subject to downward revisions.
Don't despair. The recent US data suggest that going into the Sandy situation, the economy was performing better than most economists believed, as third-quarter gross domestic product (GDP) growth rates were revised sharply upward. Also coming out of the storm, some of the weekly data, including shopping centre sales and initial unemployment, showed some pretty sharp improvements.
A Hard Rebound for US Auto Sales
This week, industry experts are expecting a hard rebound in auto sales, which should also help lift some of the gloom and give us some concrete evidence that the storm-related declines are not permanent. Auto sales were the first storm-affected piece of data to be hit hard, and I suspect that they will be the first to rebound. Mercifully, gasoline prices are also continuing to decline, putting more money in consumers' pockets during the crucial holiday season.
In this past week's economic news the US GDP report was indeed revised sharply higher to a growth rate of a very respectable 2.7%, up from the initial read of 2.0%. Unfortunately, changes in inventory levels represented a bigger portion of the revision than I had hoped.
The personal income and consumption report was disappointing, but included large, negative manual adjustment for storm effects that took almost 0.2% off of the income report.
Three of the four real estate-related reports were quite a bit better than expected, while new home sales were disappointing, but clearly affected by Sandy. Thursday's same-store sales report was substandard on the surface, falling well short of expectations. However, several chains noted that the storm had a bigger-than-anticipated influence on the first few weeks of the quarter, while the last two weeks of the quarter were surprisingly strong.
On the manufacturing front, durable goods orders were positive and better than expected. Meanwhile, the Chicago purchasing managers' report moved back over 50 (indicating more firms saw growth rather than contraction) after spending two months below 50. The employment part of the report was particularly strong while the new order indicator was disappointing.
The original version of this article appeared on December 1, 2012, on Morningstar.com, a sister site to Morningstar.co.uk.
