i can't post a link to this, it's a subscription service.
S&P Economic Outlook
10/30/2006 S&P ECON OUTLOOK - Fed On Hold
DAVID WYSS, BETH ANN BOVINO: We expect the Fed to hold at 5.25% for the remainder of the year. Housing market data continued to point to a slowdown, while third-quarter growth was weak. The news overall continues to suggest that the economy is slowing. Although the third-quarter core personal consumption expenditures deflator was more tame than expected, it remains above 2%, demonstrating that inflation remains an issue. The Oct. 25 FOMC statement confirmed the economy has slowed, but inflation remains a concern. The September FOMC minutes said many participants "emphasized" continued concerns over the outlook for inflation, seen in the still-elevated core prices, despite signs of some deceleration, but also mentioned the drop in energy prices. Sentiment indicators were unexpectedly strong.
The Fed continued its pause at the two-day October meeting as expected, with Richmond Fed President Jeffrey Lacker again the lone dissenting vote. The statement was little changed from the September version, emphasizing a wait-and-see approach until new data comes out. FOMC minutes gave no indication of a rate cut being considered.San Francisco Fed Bank President Janet Yellen said thatinflation was still "too high" and a "bias toward further firming" of interest rates was needed, but she also noted that inflation could fall faster than expected on its own.
The December fed funds futures rate is now 5.25% and is expected to decline toward summer 2007, indicating that the market expects a rate cut in May. Economist forecasts for rate hikes now outnumber estimates for rate cuts.
10/26/2006 S&P WEEKLY ECONOMIC CALL
United States: The Federal Open Market Committee (FOMC) kept the federal funds rate at 5-1/4%, as widely expected.The policy statement remained concerned about inflation, but confirmed "economic growth has slowed". The slight changes to the statement didn't offer any big surprises.Given more tame energy prices and a cooling economy, weexpect the Fed to keep the federal funds rate at 5-1/4% for the rest of the year.
--U.S. existing home sales fell 1.9% to a 6.18 million (mln) annualized pace in September, below both the 6.25 mln expected and the 6.30 mln reported in August. The supply of homes on the market held at 7.3 months, while the median price declined 2.2% over last year to $220,000. The data are weaker than expected, to still indicate a major downtrend for housing.
--The Philadelphia Fed Business Outlook Survey slipped to negative 0.7 from negative 0.4. This was in contrast to the strong Empire State manufacturing survey, which surged to 22.9 in October after increasing to 13.8 in September.The contradictory reports add more weight to the ISMsurvey, which is due out in two weeks. We expect a reading of 53.0.
--Initial claims for unemployment insurance fell 10,000 to 299,000 in the week ended October 14, a level not seen since late June. Continuing claims for the October 7 week rose 25,000 to 2,453,000. The insured unemployment rate held at 1.9%, still showing job-market strength.
--The Conference Board's Index of Leading Indicators rose 0.1% in September after two consecutive declines.
--Crude oil rebounded to $61.40 per barrel (bbl) on Wednesday, on hefty across-the-board EIA stock draws, combined with OPEC production cuts. According to the EIA report, crude stocks dropped 3.7 mln bbls, well below a 2.5 mln bbl expected build. Gasoline plummeted 2.8 mln bbls, versus the 0.5-mln drop expected. Distillates fell 1.4 mln bbls versus an expected 1.1-mln bbl fall. Refinery usage edged down 0.1% to 86.2%. December gold futures rose $3.20 to $590.80 per ounce on Wednesday.
--Bond yield on the 10-year note edged down to 4.76 Wednesday from 4.8% last week on weakness in existing home sales and no big surprises in the Federal Reserve's FOMC statement. Mortgage demand increased 0.5% in the week ended October 20. The increase was solely concentrated in refinance applications, which rose1.8%. Purchase applications fell 0.6%.
--The dollar weakened slightly against major partners this week, on the lack of surprises in the FOMC statement and more hawkish statements elsewhere. The euro edged up to $1.26 through Wednesday from $1.25 last Wednesday on strength in Germany's Ifo index. The pound rose to $1.88 from $1.86. The yen rose to 119.1 Wednesday from 118.1 last week.--Canadian retail sales firmed in August, thanks mainly toa 1.5% month-over-month (m/m) gain in auto sales. Retail sales rose 1.0% m/m and 7.4% year-over-year (y/y). Outside of auto sales, most other retailing sectors also posted gains.
That's a pretty detailed view on the economy in terms of real data. Like I said, alot of mixed indicators, but verification that the economy is slowing.
10-30-2006, 04:27 PM
