World economic news and updates related to the mortgage industry or global economy

For the week of February 11, 2008

THERE ARE TWO CERTAINTIES

Sometimes in life (outside the courtroom) the verdict comes in before the jury is out and this is especially true this election year. Two things are certain before deliberations are complete:
1. Washington is going to deliver tax rebates to encourage consumer and business spending. 2. The Fed is going to continue cutting rates until the economy shows signs of warming.
The classic definition of an economic state of recession is when there is negative economic growth for two consecutive quarters. While the economy has been slowing toward a stall, growth has been weak but not negative.
So what does 2008 really look like and how will the economy fare?
An economic downturn, led by a decline in the housing market, will remain with us through 2008, according to the head of the San Francisco Federal Reserve regional president, Janet Yellen.
"I consider it most probable that the U.S. economy will experience slow growth, and not outright recession, in coming quarters...Turbulence in the financial market is due to some fundamental problems that are not likely to be resolved quickly." Yellen says.
Here are some of the concerns highlighted:
1. Consumer spending will continue to fall. 2. Continued decline in home prices will further reduce homeowners' wealth. 3. Growing delinquencies on consumer loans. 4. Continued volatility in the financial markets will dampen consumer spending.
Yellen sees these conditions countered by:
1. Congress' economic stimulus bill which could provide some economic boost in the latter half of the year. 2. Continued relatively low inflation. 3. "Appropriate monetary policy [that is] consistent with price stability", dropping inflation below 2 percent.
While some economists fear that the Federal Reserve's 2.25 percentage point reduction of the key interest rate since October '07 will boost inflation, Yellen believes if inflation remains in check that the Fed will likely make further rate cuts this year.

Key Economic Reports Released This Week

RELEASE DATE	ECONOMIC INDICATORS	RELEASED BY	CONSENSUS	Wt.	INFLUENCE ON INTEREST RATES
Mon 02/11 1:00 pm et	Weekly Bill Auction	Dept. of the Treasury	N/A	**	If strong demand If weak demand
Tue 02/12 2:00 pm et	Treasury Budget for January '08	Dept. of the Treasury	$30.8B	*	Undetermined
Wed 02/13 7:00 am et	MBA Mtg Apps Survey for week ending 02/08	Mortgage Bankers Association of America	N/A	*	Undetermined
Wed 02/13 8:30 am et	Retail Sales for January '08	Bureau of the Census Dept. of Commerce	-0.2% x-autos 0.2%	****	If above consensus If below consensus
Wed 02/13 10:00 am et	Business Inventories for December '07	Bureau of the Census Dept. of Commerce	0.4%	*	If above consensus If below consensus
Thu 02/14 8:30 am et	Jobless Claims for week ending 02/09	Bur. of Labor Statistics Department of Labor	342K	*	If above consensus If below consensus
Thu 02/14 8:30 am et	International Trade for December '07	Bureau of the Census Dept. of Commerce	-$61.1B	**	If above consensus If below consensus
Fri 02/15 8:30 am et	Import & Export Prices for January '08	Bur. of Labor Statistics Department of Labor	ImPrice 0.5%	*	If above consensus If below consensus
Fri 02/15 9:15 am et	Ind Prod/Cap Utilization for January '08	Federal Reserve Board	IP 0.1% CU 81.3%	***	If above consensus If below consensus
Fri 02/15 10:00 am et	Consumer Sentiment for February ' 08	University of Michigan	77.0	*	If above consensus If below consensus

* Low Importance

** Moderate Importance

*** Important

**** Very Important

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