By Theresa Sheehan

PRINCETON (SMRA) – The weekahead is shortened by the Christmas
holiday, and government offices, as well as most businesses other than
retail, will be closed on Friday. The bond market will also be closed on
Friday, and have an early close 14:00 ET Thursday.

The data next week will provide a closer look at housing,
manufacturing, consumer confidence, growth, and consumer spending.

The majority of the economic data on the calendar will be released
Wednesday and Thursday. Any other time of the year these data would have
greater market-moving potential, but the proximity to the holiday
suggests unless there is something outside of expectations, it will
receive little attention.

The Federal Reserve’s weekly data on money supply and the balance
sheet will be moved from the normal Thursday release to the following
Monday, December 27.

The third and final estimate of third quarter GDP will be reported
at 8:30 ET Wednesday. At this point any revisions are likely to be small
and offsetting. The 2.5% growth rate in the third quarter reported last
month is probably slightly below what will be printed. In any case, the
fourth quarter is now well advanced, and data so far suggest a
strengthening in economic activity, particularly for consumer spending
and lower net exports.

Personal income and spending for November at 8:30 ET Thursday will
probably reflect slow growth in wages and salaries, and a stronger trend
for personal consumption expenditures.

November sales of existing homes will be reported at mid-morning
Wednesday, and for new single-family homes at the same time Thursday.
Although there are signs of some improvement in the labor market,
potential buyers are wary about the direction of the economy in general,
and home values in particular. Small increases in mortgage rates may
prompt a few consumers into buying a home to avoid even higher rates.
However, the overall housing market is still sluggish at best.

The FHFA House Price Index for October at 10:00 ET Wednesday will
probably be in line with the slight downward trend of the last few
months. Home values are not plunging, but there is continued pressure
from a large supply of foreclosed and distressed properties on the
market, as well as from a slow sales environment.

The November Advance Report on New Orders for Durable Goods at 8:30
ET Thursday should once more swing on the transportation component. Some
modest demand for new motor vehicles will be more than offset by a
plunge in orders for civilian aircraft.

The final reading of the Reuters/University of Michigan Consumer
Sentiment Index for December will be released at 9:55 ET Thursday. The
preliminary index was 74.2, up nearly four points from the final
November reading. On the whole, consumer confidence seems to be rising
towards year-end.

Initial jobless claims for the week ended December 18 at 8:30 ET
Thursday will be for the November survey comparison week. This will be a
five-week interval during which claims have moved lower in a choppy
progression. Layoffs typically rise towards year-end as some seasonal
industries close down for the winter and businesses reduce payrolls in
cost cutting measures.

The Labor Department has said they expect claims to begin rising
towards the “relative maximum” and hit the highest point in the year by
the second week of January 2011.

The BLS data on mass layoff activity in November at 10:00 ET on
Wednesday should be of a piece with recent months. Governments continue
to pare payrolls to close budget gaps, while private industry is laying
off smaller than usual numbers of workers towards year-end.

The ICSC/Goldman-Sachs Retail Tracking Index for the week-ended
November 18 will be released at 7:45 ET Tuesday. There may be impacts
from the massive snowstorm that blanketed much of the Midwest, as well
as from the deep cold that covered much of the Eastern seaboard. Still,
there was also warmer-than-usual weather in the Western half of the
U.S., so it may cancel out.

Treasury will announce new 2-, 5-, and 7-year notes on Thursday, to
be auctioned on Monday through Wednesday in the subsequent week,
respectively. All will settle on Friday, December 31.

The Bank of Japan governors will meet on Monday and Tuesday.
Modestly better economic news should keep the bank on hold for the
moment, although the easing bias will remain in place. After this, there
are no major central bank meetings on the calendar until early January.

SMRA will not publish a separate overview for the December 27 week
due to holiday scheduling.

The December 27 week is relatively quiet. Friday is an official
holiday for the observance of New Years Eve. However, financial markets
will be open because of year-end; the bond market will close at 14:00
ET.

The Federal government will be operating at a slower pace in the
remaining four days while many workers are on holiday. There are no
meetings for major central banks on the calendar. Congress will be on
recess until later in January.

The economic data calendar is light, and the releases will mainly
provide some further details on data already reported.

There are three remaining Federal Reserve District Bank surveys of
manufacturing that will round out what is known of conditions in the
factory sector for December. The Dallas Fed Texas Manufacturing Outlook
is at 10:30 ET Monday, the Richmond Fed Survey of Manufacturing is at
10:00 ET Tuesday, and the Kansas City Fed Manufacturing Survey is at
11:00 ET Thursday. Both the New York and Philadelphia surveys have
pointed to continued expansion, and we expect next week’s reports to be
consistent with this.

The Chicago Purchasing Managers Business Barometer for December at
9:45 ET on Thursday will help shape expectations for the ISM
Manufacturing Index on Monday, January 3 at 10:00 ET. The index has been
quite strong since the start of 2010, and will probably finish off the
year with another solid reading.

The October S&P/Case-Shiller Home Price Index at 9:00 ET on Tuesday
will be taken in context with the FHFA House Price Index reported in the
prior week. Although home prices have worked their way off the lows
reported in early 2009, the recovery in home values remains fragile.

The Conference Board’s Consumer Confidence Index for December at
10:00 ET on Tuesday will be the last of the monthly measures of consumer
attitudes to be reported. Both the Conference Board and
Reuters/University of Michigan indexes improved in November. December
promises to also show consumers as more optimistic.

Initial jobless claims for the week ended December 25 at 8:30 ET on
Thursday may provide some revisions to the December 18 survey comparison
week level. On the whole, levels for new and continuing claims are
working lower.

The weekly ISCS/Goldman-Sachs Retail Tracking Index for the week
ended December 25 at 7:45 ET on Tuesday will sum up the shopping season
leading up to Christmas. However, in recent years the week between
Christmas and New Years is extremely busy as shopper head out to find
bargains on seasonal goods. This may prove more problematic this year as
many retailers kept careful control of inventories. There is likely to
be much less unwanted merchandise left on shelves to offer at steep
discounts.

** Stone & McCarthy Research Associates **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]