Economic Highlights for the week ending December 28, 2007 Economic Week In Review: A Less-Than-Merry Christmas Vanguard 12/28 - The holiday-shortened trading week was a light one for economic reports, and what little news there was didn't bring much Christmas cheer. Sales of new homes declined yet again, and orders for durable goods were weaker than expected. Consumer confidence was up a bit, however, heralding one of the week's few bright spots. For the week, the S&P 500 Index fell a fraction of a percent to 1,478 (for a year-to-date total return of 4.2%). The yield of the 10-year U.S. Treasury note rose 8 basis points, to 4.07%. Durable Goods Orders - NovemberVanguard 12/28 - New orders for durable industrial goods, a closely watched gauge of future economic performance, were up a meager 0.1% in November, falling far short of the expected 3.0% increase. A surge in orders for civilian aircraft helped offset declines in other areas—including a 24% drop in defense orders—but analysts said overall demand was dampened by persistent business pessimism and the consumer credit crunch. usiness inventories and unfilled orders remained stubbornly high, hinting at more lean months to come for the manufacturing sector. Bear Stearns 12/27 - Transportation orders rose 1.9% in November (durable goods orders excluding transportation fell 0.7% in the month). The last three months have seen no growth in durable goods orders, either overall or excluding transportation. These data and survey data suggest that manufacturing activity has slowed and is likely to remain somewhat sluggish in the months ahead. However, government and industry data suggest that inventory levels are relatively lean, which will likely limit the downside for manufacturing. Unemployment Claims – Dec. 22Bear Stearns 12/27 - Initial jobless claims were little changed, rising 1,000 to 349,000 in the week ending December 22nd. The four-week average of claims fell 1,000 to 342,500. The rise in jobless claims in recent weeks points to a slowing in job creation in December. Consumer Confidence Higher - DecemberVanguard 12/28 - After a gloomy autumn, Americans seemed to grow a bit more cheerful about the economy as the holidays approached. The Conference Board's index of consumer confidence inched up in December to 88.6 from November's upwardly revised 87.8, ending a four-month string of steep declines. A close look at the numbers suggests that while consumers are still pessimistic about current economic conditions, expectations for the future brightened. Still, economists noted that the index remains low by historical standards. Bear Stearns 12/27 - Consumers' perceptions of the labor market weakened in December as jobs "plentiful" fell to 22.7% from 23.3% in the prior month, while jobs "hard to get" rose to 23.5% from 21.4%. Thus, the net reading on jobs "plentiful" minus "hard to get" fell to -0.8% in December (the first negative reading since November 2005) from 1.9% in November. Although consumer confidence improved in December on an uptick in the assessment of future economic conditions, the more objective employment indicators deteriorated in the month. The jobs indicators in this report, combined with the recent data on jobless claims, suggest only modest employment creation in December. Chicago Purchasing Managers’ Index – NovemberBear Stearns 12/28 - The Chicago purchasing managers' index was significantly stronger than expected, rising to 56.6 in December from 52.9 in November. The rise in the overall activity index, which was driven by leading indicators, paints a stronger picture of manufacturing activity than the recent durable goods data. This report, along with the increase in an ISM-type index of the individual Philly Fed subindexes, suggests that the national ISM index rose in December and we are projecting a pickup to 51.5 from 50.8 in November. New Home SalesVanguard 12/28 - Sales of new homes plunged a seasonally adjusted 9.0% in November, extending the industry's long slump. Sales were off most sharply in the Midwest and Northeast (–28% and –19%, respectively) but rose 4% in the West. Over the past year, new-home sales have fallen more than 34% nationally. At the current sales rate, it would take 9.3 months for all unsold new homes to be purchased, up from 8.8 months in October. The median price of a new home was $239,100, down 6% from where it stood in January. Bear Stearns 12/28 - New home sales were much weaker than expected, falling 9.0% to 647,000 in November. Also, September new home sales were downwardly revised to 699,000 from 716,000 and October sales were revised down to 711,000 from 728,000. A miserably weak report that shows, once again, it is too soon to talk about stabilization in housing activity. The Economic Week AheadVanguard 12/28 - Economic analysts will ring in 2008 with a fresh batch of data, including the latest figures on existing-home sales, construction spending, factory orders, and two reports on economic activity from the Institute for Supply Management. In addition, the Federal Reserve Board's Open Market Committee will release the minutes from its December meeting, giving market watchers some insight into Fed policymakers' thinking about the year ahead. Bear Stearns 12/28 - This is an important data week on the economic calendar as we get both the employment report and the ISM manufacturing survey this week. Existing home sales data will be released on Monday. We get the ISM manufacturing survey, construction spending data and the FOMC minutes from the December 11 Fed meeting on Wednesday. Thursday brings Challenger layoffs, ADP employment, weekly jobless claims, factory orders and auto sales data. The employment report and the ISM non-manufacturing survey will be released on Friday. Have a great 2008!
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