Economic data

Philly Fed was a touch below forecasts at 19.3 vs the forecast of 20.8 and vs 20.8 in Dec but still compares favorably with the avg of 12.7 over the past 12 mo’s. New Orders jumped 13 pts to the highest since Sept ’04 and Backlogs rose by almost 5 pts to the most since Mar ’06. Inventories went positive for the 1st time since July ’10 and Shipments rose 8 pts. Employment was also a positive, rising 13 pts to 17.6, the most since Apr ’06. All of the above point to continued strength in mfr’g but the issue is becoming inflation as Prices Paid rose 6.4 pts to the highest since July ’08 and more worrisome for the Fed, Prices Received 7.7 pts to the highest since Aug ’08, reflecting growing price power on the part of mfr’s. The overall 6 mo outlook fell 5.6 pts to a still high 49.8. Bottom line, we see continued growth but with rising inflation pressures and global stocks have sold off today on that concern and the coincident rise in interest rates.

Notwithstanding the foreclosure robosigning issues in late Sept/Oct, Dec Existing Home Sales, measuring closings where contracts were likely signed in Sept/Oct, were above forecasts at 5.28mm annualized vs the consensus of 4.87mm with all 4 regions of the country seeing gains. The single family component rose to the best since May ’10 and Condo/co-op sales rose to the most since June ’10. Combining the sales gain with a 157k drop in homes for sale, the inventory to sales ratio fell to 8.1 from 9.5, the lowest since Mar ’10. The NAR said distressed sales totaled 36% vs 33% in Nov and the median price of sales fell 1% y/o/y. The average 30 yr mortgage rate in Dec was 4.93% vs 4.29% in Oct and that’s a monthly difference of $100 on a $250k mortgage. Bottom line, after the large drop over the summer after the tax credit expiration, sales are coming back with the pace of job gains replacing the tax credit as the main factor in sales looking forward.

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