Economic Report

We had some important economic indicators come out last week. Core PPI which exlcudes food and energy was up .2% during January. However, if you include food and energy the PPI was -.6% indicating two things: first, the effect food and energy has on inflation and second, aside from energy prices the economy is growing at a moderate pace and .2% inflation is a comfortable number for investors.

As for housing starts, there were 1.408 million in January, down about 200,000 (-12%) from December's 1.642 million. This shows that although the housing market it starting to slow down, it is doing so at a not so drastically fast pace.

Lastly, consumer sentinement was down 4.7 points to 93.3 as surveyed by the Michigan's Consumer Survey Center. This indicator shows that consumers are not expecting economic growth and that consumer spending may start to slow down during February and March which would slow growth and inflation.

Also, at last meeting I was asked what the Fed said at the last FOMC meeting. To quote their minutes it says, "The Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information." Moreover, Fed Chairman Bernanke said in a recent speech that "If inflation becomes higher for some reason, then the Federal Reserve would have to respond to it" These two statements allude that we are currently seeing steady growth but should that growth pick up speed, the Fed will most likely raise interest rates.

Tomorrow we are expecting the CPI to come out at 8:30am ET.