MONDAY, December 14th Recent economic data point to better than expected consumer spending gains in October and November. Revitalized spending is critical to an economic turnaround as it accounts for nearly two-thirds of total economic activity. While the near term outlook for spending is generally positive, long term gains need support from job and income growth. Household wealth, inflation and credit conditions also have an impact. Recovery will not be complete until the economy starts producing jobs.

TUESDAY, December 15th The producer price index jumped 1.8% in November led by a 6.9% surge in energy prices. Food prices were also higher. Over the past year, producer prices have climbed 2.7%; despite this, weak demand will soften near-term producer inflation going forward. Excluding food and energy prices from the index, the core PPI gained 0.5% on the month and was up a mild 1.2% on the year. The monthly surge in core prices was attributable to higher vehicle prices related to the new model year. Industrial production increased 0.8% in November led by a rebound in factory activity. Expansion in manufacturing activity is expected to continue going forward as firms work to rebuild lean inventories. In another encouraging sign, the capacity utilization rate jumped to 71.3% last month, its highest level of the year, from 70.6% previously. Homebuilders were more pessimistic in December. The NAHB housing market index fell to a level of 16 this month from a reading of 17 last month. Builders downgraded current single family sales as well as projections of sales six month from now. Despite the decline in the overall index, builder sentiment did improve in the West and Northeast during the month.

WEDNESDAY, December 16th The MBA mortgage applications index rose 0.3% to 667.3% for the week ending December 11. Although mortgage activity is still 20.7% below its year ago level, there has been little net change in overall mortgage activity in the past 5 months. The consumer price index increased 0.4% in November, matching expectations. The CPI is now up 1.9% on the year. Gains were modest in the headline number even with a surge in energy prices. Excluding food and energy prices, the core CPI was unchanged on the month and up 1.7% on the year. Consumer prices are expected to remain soft in coming months as the economy finds its footing. Housing starts jumped 8.9% in November to an annualized pace of 574k, roughly in line with market expectations. November starts rebounded from a 10% decline in October. Housing starts have been climbing irregularly higher since touching a record low annual rate of 479k in April. As widely expected the FOMC voted to keep rates in an exceptionally low range of 0% to 0.25% in order to support ongoing recovery in the economy. The Committee acknowledged improvement in the economy with very subdued inflation. Policymakers maintained their commitment to buying up to $1.25 trillion of agency mortgage backed securities and up to $175 billion of agency debt. In addition the Fed anticipates that most of their special liquidity programs will expire on February 1, 2010. The Fed and fiscal and market forces have generated the beginnings of an economic recovery and resolved much of the distress in financial markets. With their mission largely being accomplished, details of the exit strategy are emerging.

THURSDAY, December 17th Jobless claims rose 7k to 480k for the week ending December 12. Initial jobless claims have maintained a level below 500k for the fourth week in a row. The labor situation is improving slowly; however unemployment claims at still at elevated levels. The index of leading economic indicators rose 0.9% in November compared to market expectations for a 0.7% gain. The increase was led by a steeper yield curve, decline in jobless claims, an increase in building permits and longer factory hours. The LEI has now increased for 8 consecutive months for the first time since 2004. Moreover, the index is up by an annual rate of 9.6% over the last six months which indicates continued expansion in economic activity over the next six to nine months.