Durable goods data
Daiwa Securities America---Moran, Michael---Economist
>> general electric has removed langone from the pension committee. he was chairman of the new york stock exchange’s compensation committee when most of richard grasso’s $180 million pay package was put in place. the afl-cio sought lange own’s ouster. separately, home depot has promised not to do business with la ng one’s -- and larry consini, resigned. according to a company filing, he quit the panel to help the company comply with the sarbanes-oxley law that mandates more independence at company boards. brocade as paid more than $6 million over the past two years to sonsini’s law firm. companies are expected to step up production and order more from suppliers. to talk about durable goods data coming out tomorrow as well as a number of other reports due out this week we are joined by daiwa securities chief economist, michael moran. durable goods are forecast to rise 1.5% coming off of a decline for the january figure. is this ray technical rebound after a seasonal pullback? or is this something bigger afoot here?
>> i think it’s going to be both. we will see noise in the numbers on the upside. we had a weak number in january and i think that was nothing more than random volatility that often appears in this report. if you get big swings in aircraft one way or another, that number tends to get weak and there’s volatility in other areas, as well. i think what we saw in january when it was down more than 2% was random volatility that should unwind in the most recent month. i think there’s more than just that type of noise going on. i think the manufacturing sector is doing much better than it had been. we have good, solid underlying trends in addition to the noise we’ll be getting. so two factors will come together tomorrow, good trends and upside volatility.
>> also we’ll get the new home sales data coming out tomorrow. that’s always an interesting number. many are focused on the fact, there the forecast for you, 1, 1,100, that’s 1.1 million new homes and the 1106 is an unchanged reading month to month. that’s an annualized figure well down from the high but still well above its 10-year average. what is your feeling about the housing market particularly as it applies to new home sales?
>> i think this market can continue to do very well. you’re correct, we are not at the highs we saw late last year but we should not have expected to stay at those highs as i think that was a temporary surge in response to movements in interest rates. if you look at where we are right now, we are still very strong historically even though we’re not quite at the high rates we saw last year. and i think with interest rates where they are, we could stay here for some time. i think the outlook for the sector is good in the sense that it will be able to hold these levels. it won’t be a growth sector because we’ve been at these high levels for some time. looking at growth rates, things will be steady but i think it’s a great performance holding at these very high levels in place.
>> let’s talk about terrorism as it captivates investors right now in the absence of economic data and before earnings season kicks in, the focus is clearly globally is on terrorism. what effect will that have if we don’t have some sort of clearing of the air on the terrorism front in terms of consumer confidence and ultimately its effect on the broader economy?
>> i think right now it would have only a small dampening effect and i think the effect it would have is probably to cut down on things like international travel more so than total consumer spending. if we do not have a terrorist act in our nation, i think the effect will be relatively small. if there is an event in our nation, though, i think you would see a larger effect. i think we would still stay on generally firm ground but you would have to reduce your forecast some if we were to have an incident here.
>> what’s a larger effect?
>> it really depends upon what type of terrorist attack we we see, if it’s a large one and i think you’d probably see g.d.p. growth about half a percentage point lower than it would be otherwise. if it’s a relatively small event, you would probably trim a 10th or so off of the forecast for g.d.p. we have good underlying fundamentals in place in several areas of the economy and i think they will continue to push us ahead.
>> michael moran, chief economist with daiwa securities. coming up, jurors in the tyco trial have asked the judge about the definition of criminal intent, once again. up next, we’ll hear about what that means for co-defendants dennis kozlowski and mark mark swartz.
