Plunging Confidence Highlights Fragility Of Econ Recovery and China Moves To Curb Housing Without Repeating ’08 Mistakes

The Conference Board’s sentiment gauge dived 10.5 points to 46, the lowest since April, on concerns about the economy, income and jobs. Wall Street expected 55. The current conditions subindex crashed to a 27-year low.

Consumer spending accounts for about 70% of economic activity. Gloomy confidence data don’t bode well for the world’s No. 1 economy. Earlier this month, the less-volatile IBD/TIPP Economic Optimism Index sank 4.1%, matching its lowest level since July.

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“The recovery is still on track, but the data do suggest the recovery will be a relatively modest one,” said Nariman Behravesh, chief economist at IHS Global Insight.

The 10 a.m. EST report spooked investors. The Dow fell 1%, the S&P 500 1.2% and the Nasdaq 1.3%. The 10-year Treasury yield fell 11 basis points to 3.69% as demand for safe-haven U.S. debt rose.

“Traders will now think about the revisions (to previously released economic data), as well as the outlook over the next couple of months. [Read the full article]

Now the nation’s central bank is trying to throttle down the pace, curbing bank lending to keep home prices from rising too fast  without stalling the key growth engine again.

Prices have jumped 10% to 30% or more in some of the major cities. In January, they rose 9.5% from a year earlier in 70 large and midsize cities.

China is running hot by several measures. Real estate is just one target of the central government’s attempt to cool the overall economy, which is growing more than 10% a year.

On Feb. 12, for the second time in a month, the central bank raised reserve requirements on banks.

Regulators had already boosted down-payment requirements from 20% to 40% for second and luxury homes.

“Raising the reserve ratio is one way to squeeze excess liquidity and curb speculative activity,” Hong Kong-based analyst Margaret Ng of CB Richard Ellis said in an e-mail. [Read the full article]

The Commerce Department reported Wednesday that new home sales dropped 11.2% last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century.

The big drop was a surprise to economists who had expected sales would rebound to an annual rate of 354,000 units from 348,000 the prior month.

The January decline will heighten fears about the fledgling recovery in housing. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.

Better late than never. Now that President Obama has finally put a health care proposal on the table, the Democratic leadership in Congress has only one rational course of action: Pass the thing, and quickly, or risk becoming the loyal minority. Should the president have done this a year ago? Yes, … [Read the full article]

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