We will soon find out whether America’s recovery is real

FEDERAL Reserve chief Ben Bernanke took aim at the housing market this month, saying it was one missing piston in the economic engine.

The Case-Shiller Home Price Index tomorrow will be the economic equivalent of a peek under the US bonnet at the start of the third quarter, with some wondering if the hum of activity has started up again.

The much-watched housing index heralded the first positive annual growth rate since the summer of 2010 last month.

But some fear housing is suffering another false start: finer detail of the report showed challenges for six cities, including Atlanta, Chicago, Las Vegas, Los Angeles, New York and San Diego.

The on-going housing struggle is about the one thing economists agree on and it’s why even some of those fiercely opposed to QE3 are less critical about one aspect of the Fed’s programme – pouring $40bn a month into mortgage backed securities purchases (MBS) until infinitum (though of course plenty of sceptics of this policy do exist).

Take Fed hawk Richard Fischer, who dissented three times on further stimulus while a voting member of the Fed’s interest-rate setting board last year. The Dallas Federal Reserve Bank President joined those last week wishing the housing market Godspeed.

“The programme could help offset some of the drag from higher government-sponsored entities’ fees that have been recently levied, will likely lower the spreads between MBS and Treasuries and should put further juice behind the housing market,” said Fischer.

But few fund managers believe housing will squeeze out benefits in the interim even if spreads between treasuries and mortgage rates continue to narrow.

The majority view is that it’s not borrowing costs that are the problem but the credit criteria of lenders and the forced deleveraging of households.

Main street is at least putting on a hearty façade lately. The University of Michigan Consumer Sentiment Index this month produced the best reading since May and prior to that all the way back to the recession in October 2007. Tomorrow gives us another update on the strength of the wallet as the election and fiscal cliff approach.

On this side of the world, we’d also happily trade the US for its headline growth rate on Thursday. US second quarter GDP will likely climb to a upwardly revised annualised 1.6 per cent.

But the thorny state of affairs in the stop-start manufacturing sector could spoil the economic picture – and pierce the QE3 bubble.

Out of all the data that deserves our attention stateside this week, the most important is August durable goods. This forward indicator of industrial production and capital spending could slump to -4.1 per cent, and RBC is clenching for a 7 per cent tumble.

Durable goods a month earlier rose 4.1 per cent but stripping out the transportation sector orders were flimsy, falling 0.4 per cent. The trend by the core measure has been down four out of five months. It’s this lack of business investment by corporate America that bodes ill for future US growth.

Those that kept riding the US stock market to multi-year highs last week on a giddy Fed stimulus train might stop at the station and revisit fundamentals. Perhaps the real data will count again this week, if only for a moment.

Karen Tso is an anchor for Squawkbox Europe on CNBC