“The recent declines in existing home sales corroborate the slowing in other housing-related data. We expect additional slowing in the housing market, including prices, in 2006. In turn, the cooling will probably result in a moderation in overall growth.”
“It remains unclear, of course, what role economic data really are playing in markets just now. Despite evidence that the recovery continues both in the U.S. and abroad, equity markets continue to struggle.”
“The implication is that raw winter weather may have depressed starts last month, particularly late in the month. Even so, starts remained above the 2003 average [of] 1.85 million [units].”
“Difficulties of seasonally adjusting the retail sector around year-end suggest that the two-month average -- about flat -- is a more reliable gauge of hiring trends.”
“That low inflation rate leaves the Fed plenty of latitude to remain on hold, and reinforces our expectation that [a rate increase] is unlikely before the third quarter of 2004.”
“You typically see a rebound in the labor force when the economy starts to recover. But because businesses are operating so much more efficiently, there's a limit to the number of jobs available. Unemployment could still go up a few ticks.”
“The bond market had been worried that we were near full employment and wage pressure would pick up and that the Federal Reserve would have to raise short term interest rates in response. But now that the all important employment cost index was up just 0.6 percent, the Fed doesn't need to raise short term rates because the economy is slowing down.”
“Fed officials ... likely anticipated some fallout in fixed income markets. We believe ... that Fed officials wanted to signal a greater probability of tightening in 2004 than had been priced into markets.”
“The consumer numbers look fairly strong, although at least some of that strength is likely to fade in coming months if housing continues to weaken. The mortgage applications data suggest home prices are already weakening.”
