Economic Factors
April 19th, 2010 10:28 AM
Economic Factors
Economic Indicator
Release Date Time
Consensus Estimate
Leading Economic Indicators
Monday, April 19, 2010
Up 1.0%
Important. An indication of future economic activity. Weakness may lead to lower rates.
Weekly Jobless Claims
Thursday, April 22, 2010
Important. An indication of employment. An increase in jobless claims may bring lower rates.
Producer Price Index
Thursday, April 22, 2010
Up 0.5%, Core up 0.1%
Important. An indication of inflationary pressures at the producer level. Decreases may lead to lower rates.
Existing Home Sales
Thursday, April 22, 2010
Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Durable Goods Orders
Friday, April 23, 2010
Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
New Home Sales
Friday, April 23, 2010
Up 1.9%
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.

Durable Goods Orders

Durable goods orders are generally believed to be a precursor of activity in the manufacturing sector because manufacturing must have an order before considering an increase in production. Conversely, a decrease in orders eventually causes production to be scaled back; otherwise the manufacturer accumulates inventories, which must be financed.

Unfortunately, durable goods orders data has many drawbacks. The first problem with the orders data is that they are extremely volatile. The volatility of the data usually is attributed to the civilian aircraft and defense components of the figure. For example, if Boeing has a big order for one of its jumbo jets, the civilian aircraft category can change by $3-4 billion. The same scenario is evident when an aircraft carrier is ordered, surges in the defense category result. The second problem with the data is that orders are continuously being revised. There are many times in the past when the advance report on durables showed an increase while a revision a week later showed a decrease. The revised data is found in the report on manufacturing orders, shipments, and inventories.

Since the data is very volatile and difficult to forecast, there is quite often a huge disparity between the actual release and the initial projections. If the durable goods report is much stronger than expected, look for mortgage interest rates to push higher. If favorable, the data may help interest rates remain steady or even push lower.

Posted in:General
Posted by Philip Jernigan on April 19th, 2010 10:28 AMPost a Comment

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