Week Ahead

This week we’ll see a moderate flow of gov’t and private data related to consumer attitude (two surveys, both to be ignored as there is very little correlation between consumer response and spending activity ahead, our view), orders for so-called durable items or factory hard goods, unemployment claims, data on both new and pending home sales, and finally, the advance look at Q4 GDP. There will also be a two-day FOMC meeting ending Jan/26.

When the week is finished and the dust settles there will be further evidence to support our anchor - consumer activity will have exceeded expectations. Not robust, but certainly much stronger than practically anyone predicted end of Q3.

We should remain constructive on spending. Some of our clients are held hostage to consumer discretionary activity, something which evaporated ‘09. We predicted early Q4 for a resumption of this activity; that was the result. We can now expect a gathering of momentum for this sector. For example, HI vacation property sales, once moribund, will accelerate through H1 into H2.

On the whole any surprises over the intermediate term for the US economy will be to the side of more vigor, not less. We can say this despite still huge imbalances in housing, despite the well-publicized mess in states’ finances, despite surging commodity prices.



Background: Never during our time in this business have politics and economic reality ahead been so intertwined. Obama inherited a bad situation (in which he had a hand in creating) and then make it a lot worse.

Yet despite that and the housing mess, consumption began to recover into 2010. But it was the Nov/2/10 election results which fired employers and consumers, extending hope that individual tax cuts might be maintained, that corporate tax cuts might be initiated and that Obama’s smothering legislation might be overturned.

Now we see that Obama has suddenly switched from gov’t planner to pretended free-mkt maven. As a result employers have become even more optimistic.

Obama will never be a Reagan or even a JFK but with his re-election in mind he’s at least saying the right words, some of them. Immelt’s appointment leads one to question his actions, but at least Obama’s no longer an outright hindrance to the recovery.

Robert Craven