Global Business Confidence:

Global business confidence has measurably improved so far in 2011. Lower response rates to the survey during the holiday season may be having an impact, but the recent results are encouraging nonetheless. Responses are stronger across the globe and to all of the questions posed in the survey. Particularly noteworthy is the increase in sales strength, equipment investment spending, and present business conditions broadly. Expectations regarding the economy's prospects have also brightened. Pricing remains soft but has also improved since the very weak pricing trends that prevailed during the holiday shopping season.

 

Treasury International Capital Flows: +$57.5 bil
Net long-term capital flows to the U.S. rose to $85.1 billion in November from $27.6 billion in October. Foreign official institutions, including central banks and sovereign wealth funds, and private foreign investors both increased their holdings of U.S. long-term securities. The pattern of foreign purchases indicates a greater level of risk aversion, as private investors' net purchases of Treasury securities accounted for much of the increase in purchases from the prior month. Foreign central banks reduced their T-bill holdings by roughly the same amount they accumulated in October.

Consumer Price Index: +0.5%
The consumer price index jumped 0.5% in December, a notch above consensus. It was easily the strongest pace set in more than a year and a far cry from the deflationary stretch last spring. The core CPI rose 0.1%, matching November's gain, which had been the first positive number in three months. These numbers will help dispel any lingering deflation concerns.

Risk of Recession: -4%
Headwinds that have been impeding the U.S. recovery, including the housing crash, household deleveraging, and the credit crunch, are fading and helping reduce the odds of the economy backtracking into recession. The probability that the U.S. will be in recession in six months fell from November's 28% to 24% for December. This is the fourth consecutive monthly decline and puts the probability of recession at its lowest since May. The recovery appears to be on more solid footing; fourth quarter real GDP growth is tracking near 4%, and the economy is expected to expand at a similar pace in the first half of this year.

The Conference Board Leading Indicators: 1.0%
The Conference Board's index of leading indicators rose 1% in December, adding to November's increase. The largest contributors to these gains were the interest rate spread and building permits, but the gains were broad based. The only drags came from supplier deliveries and new orders. All told, the fast-paced increase in the leading index over the past several months suggests that the recovery will be strong in 2011. The coincident index increased 0.2%.

Jobless Claims: 404,000
Initial claims decreased by 37,000 to 404,000 for the week ending January 15; the prior week's data were revised down from 445,000 to 441,000. This overcame the prior week's large gain and more, though readings during this time of year always tend to raise some doubt. Regardless, this is consistent with the labor market making gradual progress. Continuing claims decreased by 26,000, to 3.861 million for the week ending January 8, though there remain millions more on extended and emergency benefits not counted in this figure.

Industrial Production: +0.8%
Industrial production posted a strong 0.8% gain in December, the biggest rise since July, when growth was still being supported by the inventory cycle. A cold-weather related surge in utilities output accounted for about half of the rise, but the important details on manufacturing were reasonably strong. Manufacturing output increased 0.4% overall and excluding motor vehicles. The inventory adjustment that produced the earlier slowing in manufacturing is winding down, paving the way for strong output growth in the first half of the year.

Business Inventories (MTIS):+ 0.2%
Total business inventories increased 0.2% in November, about in line with the expected 0.1% gain. This reflects slower inventory accumulation but is also a result of price effects. Previously released wholesale trade inventories showed a decline of 0.2% led by a drop in price-sensitive wholesale nondurable inventories. Slower inventory accumulation will be a modest drag on real GDP growth in the fourth quarter. 
 

NAHB Housing Market Index: --
The NAHB housing market index stayed level in January for the third consecutive month. The overall index held steady at a level of 16. The current sales and expected six-month sales components remained unchanged, while the index for prospective buyers' traffic edged up by 1 point. Homebuilder confidence is no longer deteriorating but remains at a very low level due to the shortage of construction financing as well as uncertainty about future house price movements.

MBA Mortgage Applications Survey: +5%
The MBA market index increased to 507, a 5% improvement from the previous week. This advance came amid a 7.7% rise in refinance applications. As a result, the refinance index now stands at 2,390.7. The purchase index, however, slipped 1.9% to 188.8.

New Residential Construction (C20): -4%
Residential construction fell again, with December's housing starts dropping 4% below November's to an annualized rate of 529,000 units. Although this decline is a bit deeper than expected and measures of construction remain very low, housing permits increased by a strong 17% m/m. This, combined with a 4% increase in completions, gives hope that housing is on its way to recovery.

Existing-Home Sales: +12%
The demand for housing is improving. Sales of existing homes picked up in December to 5.28 million annualized units. This increase of 12% is stronger than anticipated and adds to hopes that housing is out of the woods. Further, months of supply dropped to 8.1. Nonetheless, home sales still have some way to go before they can be called healthy; the pace of sales is just above the low 5.13 million average of the past 18 months. Moreover, the median house price is down 1% from one year ago.

Chain Store Sales Snapshot: -0.1%
Chain store sales continued their weak start to 2011. In the latest week, ice and snow storms disrupted shopping. Sales fell 0.1% according to the ICSC, but year-over-year growth tumbled to 1.4%, the weakest result since mid-May, during the fallout from the European sovereign debt crisis.

 

Retail Sales: +0.6%
Strong growth in retail sales continued in December, with sales growing 0.6% on top of November's 0.8% growth and October's strong gain. Consumers have clearly picked up the pace of their spending. Excluding autos growth was 0.5%, modestly slower in prior months. Growth in December was led by nonstore retailers, building supply stores, drugstores, and gas stations. Department stores sales dropped sharply, although not enough to reverse November gains. Grocery, electronics and appliance, and apparel stores were among other losers. Sales were 7.9% above their year-ago level as holiday spending broadly exceeded expectations.

Weekly Natural Gas Storage Report: -243.00 bcf
Working gas in underground storage fell by 243 billion cubic feet during the week ending January 14, more than the consensus estimate of a 233 bcf decline. This report will push natural gas prices higher.

Oil and Gas Inventories: +2.6 mil barrels
Crude oil inventories rose by 2.6 million barrels during the week ending January 14, confounding the consensus estimate for a 500,000 barrel decline. Distillate inventories rose by 1 million barrels, matching estimates, while gasoline inventories rose by 4.4 million barrels, more than expected. Refinery capacity utilization declined precipitously from 86.4% to 83%. Petroleum demand rose slightly. This mixed report is a small positive for oil prices.

Source: Economy.com 

When the world economy nearly collapsed in late 2008, many proponents of globalization feared that a contagion of protectionism would break out, poisoning the prospects for new trade initiatives that could provide long-term benefits for both companies and consumers. In the United States, unemployment was rising to unacceptable levels due in part to continued business services outsourcing (especially to India) and the steady influx of imported goods (especially from China).

Many of the trends in international trade that have developed over the past few decades appeared likely to be altered, or even reversed, in response to the weaknesses exposed by the economic downturn.