Five Things You Need to Know: Housing Starts; NAHB Housing Market Index; China's Middle Class Revisited; Putting Figures to the Facts; Last Day of Winter
What you need to know (and what it means)!
Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Housing Starts
New home starts increased 9% in February to 1.525 million, ahead of expectations of a slight decline to 1.445 million.
- According to the government release, the 9% increase has a margin of error of only +/-10.2%.
- Single-family homes in February came in 10.3% above the January figure, with a margin of error of only +/-8.8%.
- Meanwhile, building permits fell 2.5%, to 1.532 million annualized, versus 1.55 million expected.
- In fact, new permits to build single-family homes fell to their worst level since 1997, according to Bloomberg.
- So why isn't the "jump" in housing starts considered more of a good thing than a bad thing for markets this morning?
- Part of the answer lies in yesterday's NAHB Housing Market Index, which correlates pretty well with revised (post-cancellations) housing starts data.
2. NAHB Housing Market Index
Yesterday afternoon the National Association of Homebuilders released their closely-watched builders' index.
- Wasn't it just a month ago when the bottom in housing was finally sighted thanks to a rise to 40 from 35?
- Yes, it was just a month ago.
- The rise in February was revised slightly lower yesterday, to 39 from 40, and declined in March to 36, ending six months of recovery .
- When the NAHB's housing market index is under 50, the number of builders who see "poor" sales outnumber the number who see "good" sales.
- The chart below shows the NAHB HMI in perspective. Even after the six-month recovery, builder confidence remains at levels that are lower than at any point since 1995.
- What if you throw a "recovery" but nobody shows up?
3. China's Middle Class Revisited
Yesterday in Number Two of Five Things, we looked at a conversation between a bull and a bear over China's ascension into the middle class. Meanwhile, a reader in the know takes us to task for using microwave ovens as a proxy for ascension into the middle class in China. Come to think of it, I don't own a microwave oven myself!
Anyway, here is Minyan Bryan's insight into China's middle class - he's lived and worked there for more than seven years - directly from the Yunnan province; well worth taking the time to read:
I gotta tell you – I read Five Things every day you write it. Great info and great humor – love it.
Now for why I'm writing -- Normally when I read misinformation about China I just laugh it off and move on but I like your work and want to give you some feedback. I have some insight into China as I've lived and worked in and around the country since 2000 – I'm currently living in the southern mountains (in Yunnan province).
I'm not sure if you are basing your microwave oven affordability on the cost of said oven or on the number sold, BUT a microwave oven is not a proxy for the middle class here. In the US everyone has a microwave – but in China it's not really the sort of thing people strive to afford. For instance, if I want to reheat food I use my hot plate, steamer or pressure cooker. But most of the time, like everyone else, I eat out. Food is cheap and people here are obsessed with good food. I would tend not to use any cooking appliance as a proxy since the nature of the food beast here is very different. Now, unlike the US, cell phones are a necessity here and probably a better proxy for the middle class. This is due to the nature of the system here; personal networks are the system… laws don't get you out of trouble, people do.
Another proxy worth considering could be washing machines – but not dryers since no one here seems to understand why you would need a clothes dryer. I saw my first clothes dryer in China about a month ago in Shanghai – made by Panasonic...the cost...about $150 USD. But since no one understands why you can't just wait for your clothes to dry, they are not big sellers. We're still waiting to see how Panasonic is going to educate the market -- should be fun and expensive.
I guess my point is that you have to watch the cultural distinctions closely when talking about China.
As far as the economy – during times that you would expect people to be at work (i.e. 10am to 7pm), the streets are filled with people of all ages buying stuff – mostly clothes and prepared foods (snacks and meals). From what I can see, the economy is booming…
Another thing – they are building second cities here. I know this is hard to imagine, but take a city like Chicago... say 5 mln people. Now imagine recreating the infrastructure and housing to recreate the whole city about five miles west. That is what's going on in the provincial capitals in China. Even when I was standing in the middle of the construction it was hard to fathom.
Keep up the good work!
4. Putting Figures to the Facts
Minyan Bryan's letter from inside China contained a number of fascinating insights. Below we put some figures to the facts.
Most of these facts, unless otherwise noted, are sourced to the CIA World Factbook, which is a handy and informative site worth bookmarking.
- As of 2006, there were nearly 437 million cellphones in use in China, about a third of the population.
- Interestingly, when "International Poverty Standards" are used, China currently has a reported 130 million people living below the poverty line.
- That's fairly small; 10% of the total population.
- The United States, on the other hand, has about 12% of the total population living below the poverty line.
- The "International Poverty Line" is an income of less than about $1 per day in purchasing power parity (PPP), which adjusts official exchange rates for cost-of-living differences between the U.S. and the country of comparison.
- The U.S. uses 3.717 trillion kWh of electricity (based on 2004 data, according to the CIA World Factbook).
- China, with a population about four times the size, uses 2.494 trillion kWh.
- The U.S. consumes more than 21 million barrels of oil per day.
- China consumes about 7 million barrels of oil per day.
- The United States, Japan and most of Western Europe are considered "old" countries by demographic standards.
- In the U.S. the median age is 36.5 years
- In Japan the median age is 42.9 years
- In Germany the median age is 42.6 years.
- By comparison, the median age in China is 32.7 years.
- Still, China's median age is fairly old compared to other developing countries. In terms of emerging market trends, consider where the "real" youth is:
- India's median age is 24.9 years
- Egypt's median age is 24 years
- Iran's median age is 24.8 years
- Pakistan's median age is 19.8 years
- Saudi Arabia's median age is 21.4 years
5. Last Day of Winter
Today is the last day of Winter in New York City... obviously.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter