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Manufacturing Improves, but Housing Still Weak

Manufacturing improving—January ISM at 60.8 was well above consensus of 58.0, and the best since May 2004. But we are seeing inflation—Prices Paid rises to highest level since July 2008.

But real estate isn't improving...construction spending in December FELL 2.5 percent, well below consensus of a fall of 0.4 percent, and the lowest level since July 2000.

Oddly, homebuilding stocks are one of the biggest sector gainers...Citigroup initiated two big construction companies—Owens Corning and Masco with a "buy" rating today, basically arguing that stocks like OC throw off significant cashflow, which as the economy improves will improve as housing improves, and they will deploy that cash to benefit shareholders. Maybe.

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