The American economy is being re-floated on a sea of red ink. Yes, there is good news. Factory sales are up, as are retail sales. Orders for capital goods, if the volatile aircraft-order segment is backed out, are coming in stronger than expected, and the figures for back months are being revised upward. Profit reports are all that investors could hope for in most cases. Ian Harwood, chief economist at Evolution Securities, is telling his firm’s clients that “US economic expectations have recently improved sharply … [and] we think this ‘upgrading’ process has further to run.”  That view is borne out by a significant rise in the Conference Board’s index of consumer confidence, apparently as a result of increased confidence in the labor market.

But the housing sector continues to lag. December sales of new homes were 7.6 percent lower than last year, and prices seem to be continuing on their downward trajectory. Still, December new home sales, led by greater activity in the Western part of the country, were up 17.5 percent over the previous month, and economists at Goldman Sachs have concluded that home prices might have stabilized at year-end.