Nothing good this week in US economic statistics

There was no good economic statistics that came out this week in the United States. We are almost at the point that the silver lining in an economic announcement will be when the downtrend is less severe.

We started out the week with the NAHB housing market index hovering just above the all-time lows. This diffusion index shows that there is no expectation for a changing the housing market for at least the next six months. Mortgage applications were down big after a large number last month at the beginning of the year. The volatility of this series has increased which is similar to what happened the last recession. Housing starts and building permits are just above the lows from the 1991 recession level. This number has to move down to allow the high inventory to be worked off. If we are early in the recession, this number will move lower over the next few months. Building permits are still above a million units on an annual basis. This number is going to have to turn down first if you expect to see housing start fall further.

The consumer confidence numbers from ABC have continued their downturn, but it should be noted that the confidence levels are still higher than what they were a year ago. Initial jobless claims have not increased significantly but the continuing claims are starting to move higher. The Philadelphia Fed factory survey moved further negative to levels that were similar to the beginning of the last recession. Exports are not going to solve the manufacturing problem.

CPI inflation is at the 4.5 percent level which is similar to what we saw in early 2006. The core inflation rate is actually below the levels from a year ago but at 2.5% which is higher than the 2% target. Nevertheless the break-even inflation rates from the difference between nominal and TIP bonds suggest that inflation will be contained as measured for 10-year maturities. The shorter-term four year break-evens are looking at an expected inflation of 2.38 percent. Bonds have traded down since the last set of Fed cuts.