Every week seems to bring an economic shocker - a report that humiliates economists' best expectations and gets investors wondering if their assumptions for a second-half economic recovery are worth anything.
The latest shocker arrived on Thursday morning: New home sales in the United States fell 14.7 per cent in December at an annualized rate from the previouse month, versus expectations for a 2.5 per cent dip. On an annual basis, sales are now down an amazing 47.7 per cent, making it the worst year since 1982.
Far more than a reflection of the terrible climate surrounding the U.S. housing market, the latest snapshot suggests that lower mortgage rates are having little impact on the economy in the face of rising layoffs. Here's what a few economists had to say about the latest figures.
Jennifer Lee, economist, BMO Nesbitt Burns: "Homebuilders cannot sell homes in an environment of 30-year high affordability and falling mortgage rates. The housing slump ain't over yet."
Ian Shepherdson, chief U.S. economist, High Frequency Economics: "We think there is a good chance this will prove the worst month in the cycle, largely because mortgage applications have picked up a bit. Still, this is an awful report, showing inventory up to a new high of 12.9 months. Builders just can't cut back fast enough, so prices remain under downward pressure."
Millan Mulraine, economics strategist, TD Securities: "On the whole, the story line here is simply that the U.S. housing sector correction has clearly intensified in the fourth quarter. And with the U.S. labour market continuing to deteriorate, and economic activity remaining considerably weak, we believe that a turnaround in housing sector activity is some way off."