Smith Faculty Opinion Article	May 16, 2007
By Dr. Peter Morici, Professor of International Business E-MAIL WEB SITE

Industrial Production and Housing Starts Post Upward Trends
Growth Picking Up and Outlook for Stocks Remains Strong

Today, the Commerce Department reported 1.528 new homes were started in April. Separately, the Federal Reserve reported industrial production rose 0.7 percent, with manufacturing posting a robust 0.5 percent. The latter figure followed a 0.6 percent gain in March.

These advances all exceed the consensus of forecasts, and the stock market should respond positively.

Stronger housing starts and manufacturing indicate the economy is picking up steam. In the second quarter, productivity growth should be stronger with employment expanding moderately; GDP should grow between 1.8 and 2.3 percent.

Capacity utilization is high, and more investments in commercial structures, machinery and computers will be needed to power growth. Business investment will play a larger role helping lift second half growth above 2.5 percent.

The Federal Reserve is not likely to change interest rates soon.

The outlook for stocks is very good. Moderate growth at home and strong earnings from foreign operations, will boost corporate profits. Combined with stable interest rates, rising profits should send stocks higher.

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.