AJ’s Economic Buzz for December 18th, 2006 

Last Week’s Economic Retrospective:

Last Weeks news showed Retail Sales numbers indicated that the consumers and the economy in general continue to hum along. If you have been out holiday shopping recently, you should be able to attest to this; the long lines and crowded parking lots all show the consumer is out spending in full force.

The downside to this is strong economic activity like Retail Sales is often accompanied by higher inflation. Still, last week's either neutral or improving read on inflation via the Consumer Price Index report did not bear out that current Retail Sales are causing inflationary pressures. The economy seems to be not too hot nor too cool. And at the end of the week, home loan rates ended exactly where they started.

This Week’s Economic Forecast:

Speaking of upcoming economic releases, this week is full of potentially market-moving economic reports. Following last week's Consumer Price Index, this week will bring an even more important read on inflation, the Personal Consumption Expenditure Index. This is another Fed inflation measure favorite because this measure is more closely aligned with what consumers are actually purchasing, not a "fixed basket" of goods and services as measured with the CPI.

We will also get a look at Housing Starts, Building Permits, the Producer Price Index on wholesale inflation, third quarter GDP, Personal Income, Personal Spending, the Philadelphia Fed Manufacturing Index, and last but not least, Durable Goods Orders as well. With the release of all these economic reports, this week could be very volatile, especially if one of the many releases and reports produce any negative numbers.

Lately, the long term uptrend for Bond pricing still remain intact, so home loan rates have remained at very attractive rates. But if we get some exceptionally strong economic news this week, Bond prices and home loan rates could worsen quickly.

Remember, as a general rule, weaker than expected economic data is good for mortgage rates while positive data causes rates to rise.

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AJ Nisen

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