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The risk of rushing to judge economy

Monday, April 01, 2013 - 02:02

April 1 - A disappointing report on the U.S. manufacturing sector may have knocked stocks from their perch, but a closer look at the economy shows investors may want to avoid rushing to conclusions. Bobbi Rebell reports.

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New data showing weaker-than-expected manufacturing, bringing up concerns of an economic spring slowdown. The Institute for Supply Management's survey showed U.S. factory activity slowed in March because new orders weakened. It's a break in a string of good economic news- and not something UBS's U.S. senior economist Drew Matus is very worried about. SOUNDBITE: DREW MATUS, U.S. SENIOR ECONOMIST, UBS (ENGLISH) SAYING: "If you are trying to look for a weak spot in the U.S. economy, they are kind of few and far between. Housing is doing ok. The labor market is doing ok. CapEx is ok, if not great. And so you add all those up and you begin to paint a very positive picture of U.S. economic activity." Just Friday, government data showed consumers spending more and feeling better about the economy- despite higher taxes. A separate report on Monday showed construction spending rose more than expected in February. And if the Fed keeps interest rates low, the housing market, and all the economic benefits of it- will continue according to billionaire investor Wilbur Ross. SOUNDBITE: DREW MATUS, U.S. SENIOR ECONOMIST, UBS (ENGLISH) SAYING: "There is a lot of pent up demand because from '08 forward there was very little buying of new homes. And meanwhile you have family formations every year so there is a built in demand but it was hidden for a while because people were afraid prices would go back down and so they didn't commit. Now prices seem to be stabilizing and rates are low, people are, I think correctly, deciding that this may be a once in a lifetime opportunity." But there is something that could start keeping investors up at night - earnings. The number of negative pre-announcements from corporate America is on the rise. 78 percent of them have been negative for the first quarter, up from 67 percent a year ago. Positive pre-announcements have been trending down. And that suggests some corporations may have been too optimistic about how fast the economic rebound will grow.

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The risk of rushing to judge economy

Monday, April 01, 2013 - 02:02