Looking Ahead: Week of December 26 through December 29

Wednesday
New home sales slipped another 3.2 percent in October to a 1.004 million unit rate. Also, the supply of new homes continued to rise - to 7.0 months in October from 6.7 months in September. To get housing construction moving again, sales need to be strong enough to push the supply of new homes down. Signs of activity have been sluggish and it may be a few months before sales are up and supply is down.

New home sales Consensus Forecast for November 06: 1.015 million-unit rate
Range: 0.975 million to 1.115 million-unit rate

Thursday
Initial jobless claims rose 9,000 in the week ended December 16 week to 315,000. However, recently strong declines still pulled the four-week average down 2,000 to a 325,750 level that is consistent with modest payroll growth. During the holiday season, seasonal adjustment is tricky on a weekly basis and the weekly numbers can swing a lot.

Jobless Claims Consensus Forecast for 12/23/06: 315,000
Range: 315,000 to 320,000

The NAPM-Chicago purchasing managers' index came in at 49.9 in November - an essentially "no change" reading for manufacturing. New orders were slightly on the positive side of the break-even point while backlogs were slightly into negative territory. Now that manufacturing is in on the soft landing, it also is important that this sector not turn significantly negative. We have recently seen weak numbers for the Philly Fed manufacturing index and in the Census Bureau's durable goods orders series. Markets will be watching the Chicago index and other regional surveys for early warnings of weakening in manufacturing that is significant enough to turn the soft landing into a hard one.

NAPM-Chicago Consensus Forecast for December 06: 50.0
Range: 48.0 to 53.5

The Conference Board's consumer confidence index slipped to 102.9 in November from 105.1 in October. Even though consumer spending has been strong, the Conference Board's index suggests that strength in the consumer sector is tenuous. Job market readings and buy plans for autos were notably soft. Markets will continue to watch the inflation expectations series, which has eased a little in recent months with a reading of 4.7 percent most recently.

Consumer confidence Consensus Forecast for December 06: 101.0
Range: 101.0 to 104.0

Existing home sales rose 0.5 percent in October to a 6.24 million annual rate but supply remains high at 7.4 months and the highest level in 16 years.

Existing home sales Consensus Forecast for November 06: 6.20 million-unit rate
Range: 6.10 to 6.30 million-unit rate