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Housing Starts Endures Recent Dip

New residential construction slipped in December but remains somewhat healthy after the jump the prior month. Starts declined 4.1%, after surging 9.1% in November.

—Haverford Investments

January 23, 2012

The FOMC Continues Transparency Initiative: This will be the first time the individual members of the FOMC will release their own forecasts for the next several years. The Committee will release two charts, the first being a bar chart showing in which year officials expect to see the first rate increase, with options ranging from 2012 all the way out to 2016. The second chart will be a chart filled with dots representing officials' projections of where rates will be at the end of 2012, 2013, 2014 and in the long run. Each dot will represent an official, but the identities of officials won't be disclosed.

Housing Starts Remains Healthy Despite Recent Dip: New residential construction slipped in December but remains somewhat healthy after the jump the prior month. Starts declined 4.1%, after surging 9.1% in November. December's annualized pace of 0.657 million fell short of market expectations for 0.678 million units and is up 24.9% on a year-ago basis. The dip in the latest month was led by a 20.4% drop in the multifamily component, following a 23.0% boost in November.

Four Republican Candidates Remain: After Governor Perry dropped from the race, it left just four presidential nominees in Romney, Gingrich, Santorum, and Paul. Newt Gingrich most recently surprisingly won the South Carolina primary, sending the previous front runner, Mitt Romney, on the defensive as they head down to Florida for the next primary vote.
Obama Turns Down Pipeline Project: President Barack Obama rejected a Canadian company's plan to build a $7 billion oil pipeline across the U.S., saying the Keystone XL project needs more of a review for its environmental impact.

CPI Doesn’t Budge:  Consumer price inflation was nonexistent in December at the headline and core levels. The consumer price index in December was unchanged for the second month in a row with lower energy costs playing a key role. The December figure was lower than market expectations for a 0.1% rise. Excluding food and energy, the CPI decelerated to a modest 0.1% increase after gaining 0.2% in November. Market expectations were for a 0.1% rise.

Look Ahead:  
FOMC Meeting Announcement:  The FOMC announcement for the January 24-25 FOMC policy meeting is expected to leave the fed funds target unchanged at a range of zero to 0.25%. Some Fed watchers are increasingly expecting QE3 and traders will be looking for language supporting this view or not. Also, the Fed will release its quarterly forecast between the announcement and the chairman's press conference. This forecast for the first time will include projections for the fed funds rate.

GDP: The advanced reading for the 4th quarter GDP will be released this Friday with expectations for a 3.1% increase. This will be the first look into how well the US Economy faired during the final months of 2011.