Flood of Data: Here's What It Means
A: Just a follow up to yesterday's post. The overall message that came from todays economic data is that the economy is doing very well, jobs are healthy, inflation improving slightly but still of concern, and housing is showing signs of stabilization. However, the housing data must take into account the very warm weather that we have had over the past months as that allowed builders to finish their products at a faster pace; so look at this particular report as evidence the housing market is hanging in there rather than rebounding. Bond yields rise as a result of this data which may cause lending rates to trickle higher in the coming week.
Lets get right into it.
US Economy is Strong & Housing Stuns Doomsdayers
Jobless Claims Fall to 11-Month Low - The Labor Department reported Thursday that applications for jobless benefits totaled a seasonally adjusted 290,000, down 8,000 from the previous week when claims had fallen below 300,000 for the first time in six months. The back-to-back improvements pushed claims to the lowest level since the week of Feb. 18, 2006.
The latest decline came as a surpise. Claims had been expected to start rising again, given weakness in such key sectors as housing and auto productions
Housing Construction Rises For 2nd Month - Construction of new homes rose for a second consecutive month in December, raising hopes that the severe slump in housing may be leveling off. Analysts cautioned that the December figure could be overstating the extent of the rebound since it was probably influenced by warmer-than-normal weather last month.
NOTE: Tons of incentives offered to new buyers are stimulating demand. Something to keep in mind as the homebuilders work to selloff inventory across the country. Doesn't really apply to NYC real estate, although some developers here are offering incentives as well in closing costs and upgrades.
Inflation Has Best Showing in 3 Years - The Labor Department reported Thursday that consumer prices rose by 2.5 percent in 2006, the best showing since prices had increased by just 1.9 percent in 2003. The improvement came in spite of the fact that consumer prices jumped 0.5 percent in December, as gasoline prices staged a momentary rebound.
UrbanDigs Says: Lending rates are directly tied to short term bond yields and as a result of today's strong economic & housing data, yields jumped. This should lead to a trickling higher of mortgage rates in the coming week or so. The US economy is strong and the surprisingly positive housing data (whether the result of weather or not) throws out ANY chance of a rate cut in the near future. In fact, the fed funds futures markets switched gears and went from a slight chance of a rate cut to a slight chance of a rate hike over the next few quarters. All in all, Mr Bernanke is looking more and more like a miracle man in his quest to balance economic growth and control inflation. Kudos for a job very well done thus far with monetary policy.
