The first real week of economic data for 2011 came as little surprise to most analysts and the markets.
The major economic reports released this week showed once again that we are going back and forth between optimism and pessimism. The reports that recap activity in 2010 plus the latest December readings are showing that industrial production continues to be the strong point of the economy while unemployment continues to be a major drag on the recovery.
The stock market has been moving up gradually in small increments. Investors are demonstrating belief in business and the future growth of corporate profits despite many negative forces on the economy such as unemployment and housing.
Is inflation a concern? It appears that on the wholesale level inflation may be starting to heat up. It is not a problem as of yet, however we have seen over the last couple of months a trend of higher wholesale prices. The rise in wholesale prices may eventually create a problem for the Fed. The challenge that lays ahead for the government is to control the rise of inflation without hurting job growth. This is no easy task as any move the Fed makes to quell wholesale inflation can have a negative impact on employment.
On the other hand, the Consumer Price Index showed that outside of volatile food and energy costs, inflation on the retail level is the lowest on record. Energy and food have been rising which is why many people feel that inflation may be worse than it really is. However, energy and food prices are always a wildcard in the inflation report. Simply put, retail companies have not been able to raise prices for goods and services outside of consumer necessities as the public has shown that they continue to be very frugal in their shopping.
Retail Sales showed a healthy jump for 2010. Overall sales rose 6.7% from the prior year which is the 2nd largest jump ever recorded.
Consumer Sentiment once again is showing that unemployment continues to be the major concern regarding the future growth of the economy. First time jobless claims increased significantly over the last 2 weeks, and once again the numbers are significantly north of 400,000 filings per week.
Housing purchases dropped 3.7% in the first week of 2010. Is this because of the time of the year, or a reflection of concern about the economy? My personal feeling is it is a little bit of both. Foreclosures for 2010 hit 1 million and the speculation is that in 2011 we will see the same or more. (Don't shoot the messenger please)
Next week housing is the main focus of the market reports. With 3 significant reports due to be released, this may very well set the tone for the movement of stocks and bonds. Recently mortgage rates have dropped slightly which can be directly related to some of the weaker economic reports that have been released.
Reports due out for the first week of 2011 are:
• Monday January 17th - Martin Luther King Holiday - Markets are Closed
• Tuesday January 18th - Housing Market Index
• Wednesday January 19th - MBA Mortgage Applications and Housing Starts
• Thursday January 20th - First Time Jobless Claims & Existing Home Sales
• Friday January 14th - No Economic Reports
Your Mortgage Consultant,
JJ Mack
916-517-1800 x300
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment