By Fred Arnold:
It is becoming clearer that business, and even consumers are becoming more and more concerned about the daily news and warnings regarding the government defaulting on their debt unless the debt ceiling is raised.
What I do know is that the government needs to borrow more money. The Republicans say they won't approve additional borrowing unless Congress commits to reducing expenses and not increasing taxes. The Democrats say they want to reduce expenses and increase taxes and that is the only way to balance a budget. Let’s see how the story plays out over the next two week!
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To add to the confusion, the Fed is clearly conflicted about what they will or won't do to help the recovery. On Tuesday the FOMC minutes that were released indicated that some people in the committee believe that another round of stimulus may be necessary to spur the economy, or at least get it moving again. On Wednesday Chairman Bernake stated that the Fed is prepared to offer more assistance if the economy continues to falter. On Thursday Chairman Bernake stated that the Fed is not willing to launch another stimulus program. Which is it...is the Fed going to go left right or straight? Will the government go left right or straight? Sounds like a movie of a summer road trip where the travelers are arguing in the car about which way to go to get the where they need to be!
In other news, mortgage rates continue to remain very low and little changed from the prior week.
Foreclosures for the first half of 2011 showed a significant drop of 29% from the same time a year ago. That is the good news. The not so good news is that it appears the drop is more a reflection of the banks slowing the process of initiating and completing foreclosures than anything else. The banks are already overloaded with properties they own and they are clearly in no rush to add more houses to their real estate owned inventory.
Inflation continues to remain under control. That’s great news! Prices on the wholesale and retail level came in showing that inflation pressure is virtually non-existent and will most likely remain that way for some time.
Finally, first time jobless claims edged lower to 405,000. This is the closest we have been to the 400,000 mark in eight weeks. The question that needs to be answered is...is the drop related to an improving employment picture, or is it because it was a holiday week? Next week's report should shed some light on what is really going on.
Economic Reports on tap for next week:
o Monday July 18th - Housing Market Index
o Tuesday July 19th - Housing Starts
o Wednesday July 20th -MBA Mortgage Applications and Existing Home Sales
o Thursday July 21st - First Time Jobless Claims
Have a great weekend!
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