Ian Shepherdson Higher Quotations

Only a few years ago, auto sales numbers, like those seen recently, would have automatically lead to expectations of higher prices, ... Now, increasing transparency in car prices, substantially due to the Internet, together with the automakers' ability to hold down unit labor costs, means that stronger sales do not necessarily lead to higher prices.

Only a few years ago, auto sales numbers like those seen recently would have automatically lead to expectations of higher prices, ... Now, increasing transparency in car prices, substantially due to the Internet, together with the automakers' ability to hold down unit labor costs, means that stronger sales do not necessarily lead to higher prices.

No doubt these numbers will be taken by the market as a clear sign of a softening housing market and, by implication, an indication that higher interest rates are biting. We are much more skeptical: housing starts lag home sales, which have been depressed in recent months more by lack of inventory than by higher interest rates.

Most notable was the leap in the prices-paid index, ... this is simply a reflection of higher oil prices but it may not have been fully anticipated in the markets.

These data leave confidence very close to its cycle high, and completely unaffected by higher interest rates. Together with the rise in home sales also reported today, the data sit very uneasily with Mr. Greenspan's dovish tone last week and again today.

This is a significant decline in confidence, ... Presumably the combination of higher interest rates and stagnant stock prices lies behind the moves, but the key point is that the steady rise in recent months has abruptly begun to reverse.

If sharply higher interest rates, and a plunging Nasdaq make people more optimistic, we are at a loss to know what it will take to depress confidence,

the need for higher rates may now be even greater than before the storm.

The Fed has begun to prepare the markets for higher interest rates, ... almost balanced.

It now appears that the trend in jobless claims is stabilizing at about 400,000 per week, ... This is well above the trend level at this time last year, but it is no higher than in the spring. This means that layoffs are continuing at a rapid pace, but they are not accelerating.

In the short-term, these data will reinforce the impression that the housing market is proving resilient in the face of higher mortgage rates, ... it will not last, because the current trend in home sales is not high enough to support this rate of house building in the medium-term.

The report suggests that industrial orders are trending higher as manufacturing recovers from the Asia crisis, ... There are no real signs of a slowdown.

The January revision is mostly due to the plunge in aircraft orders reported in the durable-goods numbers. In February, the index was pulled down by lower consumer confidence, higher jobless claims, shorter delivery times and lower building permits.