- Leading Indicators for December fell .2% versus estimates of a .1% decline and a .4% decline in November.
- Preliminary Univ. of Mich. Consumer confidence
BOTTOM LINE: The Index of US leading economic indicators fell more than forecast in December, Bloomberg reported. However, the Conference Board’s index of coincident indicators, a gauge of current economic activity, rose .1% in December for a second month. The index tracks payrolls, incomes, sales and production. Over the last six months, the leading indicators index has dropped at an annual pace of 1.6%, below the 4-4.5% drop that signals recession. I continue to believe US GDP growth will average about 2% for the year. Growth should pick up in the second half of the year on inventory rebuilding as exports remain at record levels and as the deflator subtracts less on a meaningful deceleration in inflation. This would provide a very positive macro backdrop for true "growth" stocks.
Confidence among US consumers unexpectedly jumped in January despite a rise in gas prices, Bloomberg reported. The Expectations component rose to 69.1 from 65.6 in December. The Present Situation component jumped to 98.1 from 91.0 the prior month. The average 30-year mortgage rate has plunged 48 basis points so far this month to 5.69%. This is also down 105 basis points from June 07 highs. As a result, mortgage refinancings are soaring, which may behind the surge in consumer confidence. A decline in the average 30-year mortgage rate below 5.5%, which I expect over the coming weeks, should greatly help with the mortgage reset situation and prevent many foreclosures that the market currently expects. This would be a large positive surprise for the economy and stock market, in my opinion.
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