Sandy scrambles fourth quarter U.S. economic data

10/30/2012 1:29 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

So much for meaningful U.S. economic data for the fourth quarter.

GDP growth for the quarter that ends on December 31 lower than now forecast? Blame it on the economic shutdown in the Northeast due to Superstorm Sandy.

Higher than expected GDP? Point to the extra spending on recovery efforts.

Mortgage originations or home sales softer than expected? Sandy.

More jobs added than expected? Temporary jobs created by Sandy cleanup efforts.

Superstorm Sandy means investors will be flying almost blind when they attempt to navigate the economic currents in the United States for the fourth quarter.

Today’s S&P/Case-Shiller index, which showed a 2% increase in housing prices in the 20 cities surveyed for the index, is one of the last data points on the economy we’ll see until the first quarter of 2013 that won’t be distorted by Sandy. The Case-Shiller index is a seriously lagging index, though, with the gain in prices reported today representing the August 2012 increase from August 2011, so it’s not clear how much it tells investors about current conditions at the best of times.

On Thursday, we’ll get initial claims for unemployment for the week ended October 27. That’s the last clean data in that series. Next week’s numbers will include the storm period. Friday brings almost clean numbers on job creation with data through the end of October.

After that, pretty much every data point will be changed, one way or another and to one degree or another by the storm.

I think that will have two big effects that investors need to keep in mind.

First, the best data on trends in the U.S. economy in the fourth quarter is likely to be the numbers on retail sales. The fourth quarter holiday shopping season always focuses attention on this data but in 2012 I think the attention will be even more intense than usual. That could actually work in investors’ favor (if they’re long anyway) if the retail season, which looked strong before the storm, lives up to expectations. And since retail sales numbers are purely domestic, extra attention to this data will diminish worries about falling revenue at U.S. companies from overseas markets. That should make reading fourth quarter earnings results reported in early January especially difficult.

Second, I think the relative paucity of clean economic data from the United States will put more attention on economic trends in Europe and China. At the moment that looks like a mixed bag with Europe in recession and China, maybe, showing a rebound in its growth rate. In effect this puts more attention on China and puts markets more at the mercy of short-term news about growth and stimulus in China.

At least that’s how it reads from a storm-bound New York today. Winds and rain are gone, but a large part of the city is still without power and the transportation system is shut down—all due to a storm surge that easily topped the old record. Odds are that I’ll be able to get back into my office tomorrow—although I may need to walk since it looks the subways still won’t be running.

All my hopes and best wishes to everyone who was in Sandy's path. Many people got hit far harder than we did here in upper Manhattan This is a time to help our neighbors in anyway we can.

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