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This Week’s Economic News, In Pictures, and in a Hurry

Last week’s economic news was not only minimal, what little we did get sent mixed messages.

Take consumer credit for example. Experts were looking for a $2 billion contraction in credit, but we actually saw a $1 billion increase in total credit levels. That’s good news, pointing to a better-equipped consumer. But.…

Retail sales were expected to be slightly higher, yet we ended up seeing a 1.1% decline in total retail sales last month. Inventories (wholesale as well as business) were both expected to increase by 0.7%, yet both were only up 0.4%. The Michigan Sentiment Index, on the other hand, still topped expectations with an increase to 75.5.

On the jobs front (which was the prompt for Thursday’s and Friday’s bullishness), new claims were down a hair, to 456K, while continuing claims plunged to 4462K, from 4717K. Analysts were expecting to see 4600K. Even so, last week’s better numbers may be as meaningless as the weaker numbers from a few weeks ago. Take a look at chart of both below….. is there actually a negative or positive (net) trend that should be driving decision-making, or are investors making something out of nothing?

The reality is, continuing claims are not only sinking again, they’re on the verge of new multi-year lows. Expired benefits? That may be part of it. For some reason though, pessimists are certain there’s no way anyone could actually be finding jobs again…. even though other evidence points to the notion that they are. We’ll take a stand in the middle, and assume the picture isn’t as bleak as some want to believe, but also not as rosy as the renewed downtrend seems to suggest.

As for new/initial claims, “not higher” is good, but the number isn’t sinking either. The floor seems to be 445K. Anything under that would be a cause for celebration. Anything less, well…..

One thing to bear in mind about the nonfarm payroll data trend on the chart below - the bulk of the recent improvement is due to government census hiring. On the other hand, non-government net hiring has still turned positive, even if tepid…. something the gloom and doomers tend to gloss over (citing ’still not strong enough’ as the understandable reason for the dismissal).

As for the current week, a lot more is in store beginning on Tuesday, but the fireworks really start on Wednesday.

Housing starts, building permits, capacity utilization, and industrial production are all on tap for Wednesday morning. The former two will point to health on the real estate front, while the latter two will point to health on the industrial/manufacturing front. And, all four are heavy hitters in terms of being able to move the market. Economists expect tepid changes - if any - across the board though.

Here’s the latest update on the two housing/real estate data sets, plus all the other related trends.

And here’s a look at capacity utilization and productivity….

Remember, we’re plotting the actual production index, and not the percent changes you’ll hear the media discuss. The plotted capacity utilization figure, of course, is a percentage.

As always, new and ongoing jobless claims are out on Thursday. Economists are basically looking for stability there too.  Both charts were already posted above.

Leading indicators and the Philadelphia Fed’s index are due on Thursday; the pros are mixed about what to expect, but aren’t looking for much change in either direction.

The other big announcements for the coming week will be Wednesday’s producer inflation, and Thursday’s consumer inflation figures. Remember, the concern here has turned from the potential for too much inflation (thanks to rock-bottom interest rates) to not enough inflation (or even deflation), stemming from an alarmingly weak recovery. So far, both sides of the worry coin have proven irrelevant, as the economy has walked that inflation tightrope quite well. Still, it remains worth watching. Here’s that chart.

And, here’s the whole calendar for the week. We’ve got a lot going on, and like we said, most of it has the potential to move stocks higher and/or lower.

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James Brumley is a freelance writer and registered investment advisor. He began his career as a broker with a major Wall Street firm, where fundamentals and long-term holding periods were core strategies. After that, he switched gears completely, becoming an analyst at a short-term trading newsletter that focused on technical analysis. He now manages client money using the best of both philosophies. His company, Bluegrass Portfolio Management, offers investors an opportunity to reap superior returns with minimized risk.