Recent tea leaves on the economy point to solid, non-inflationary growth in 2011, but some of the bullishness at the end of 2010 has been tempered, as employment market gauges remain subdued and consumer confidence is wobbling again in the face of higher gasoline prices.
U.S. equity markets performed well over the week, as solid fourth-quarter earnings reports lightened the sobriety on the economy. Bond yields also traded lower by a few basis points, and mortgage rates thankfully have reversed track.
Fed chairman Ben Bernanke indicated later in the week that he expects U.S. growth in the 3.0–4.0% range during 2011, which is a modest upgrade relative to the FOMC central tendency forecast of 3.0–3.6% in November, but perhaps of more significance is that this is the Fed's first upward revision in the outlook for quite some time.
Next week will be a relatively quiet one on the economic front, with some modest positive news expected on the housing sector in December—an expected bump in both permits and existing home sales.
Beyond that, we are getting more into the meat of the earnings season, with IBM and Apple in the tech sector and a number of key financials such as Citigroup, Goldman Sachs, Wells Fargo, Morgan Stanley, and Bank of America expected to report. The positive earnings surprise from JP Morgan on Friday provided a solid lift to the banking sector in advance of next week's releases.
KEY U.S. DATA RELEASES THIS WEEK
Wednesday, January 19 – Housing Starts (Dec.)
Housing Starts (Dec.)
- IHS Global Insight: 0.540 Mil.
- Consensus: 0.550 Mil.
- Last Actual: 0.555 Mil. (Nov.)
Building Permits (Dec.)
- IHS Global Insight: 0.562 Mil.
- Consensus: 0.555 Mil.
- Last Actual: 0.544 Mil (Nov.)
What to Look For
- Starts expected to decline by about 2.7% in December, but permits are expected to see a 6.0% bounce.
Implications
A combination of cold weather in the South, wet weather in the West, and snowstorms that blanketed much of the Northeast and Midwest most likely suppressed housing starts in December. Our projection is that housing starts dropped 2.7% to a 540,000-unit annual rate. With the economy slowly adding jobs, we are expecting an increase in housing permits to a 562,000.
Thursday, January 20 – Existing Home Sales (Dec.)
- IHS Global Insight: 4.84 Mil.
- Consensus: 4.89 Mil.
- Last Actual: 4.68 Mil. (Nov.)
What to Look For
- We expect a 3.5% gain in existing home sales.
Implications
The Pending Home Sales Index rose 3.5% in November—the best reading in seven months. Based on this reading, we are expecting a 3.5% pickup in existing home sales during December, with the West accounting for the lion's share of the increase.
