A less-than-merry Christmas

The holiday-shortened trading week was a light one for economic reports, and what little news there was didn't bring much Christmas cheer. Sales of new homes declined yet again, and orders for durable goods were weaker than expected. Consumer confidence was up a bit, however, heralding one of the week's few bright spots. For the week, the S&P 500 Index fell a fraction of a percent to 1,478 (for a year-to-date total return of 5.5%). The yield of the 10-year U.S. Treasury note rose 8 basis points, to 4.07%.

Another bleak month for home sales

Sales of new homes plunged a seasonally adjusted 9.0% in November, extending the industry's long slump. Sales were off most sharply in the Midwest and Northeast (–28% and –19%, respectively) but rose 4% in the West. Over the past year, new-home sales have fallen more than 34% nationally. At the current sales rate, it would take 9.3 months for all unsold new homes to be purchased, up from 8.8 months in October. The median price of a new home was $239,100, down 6% from where it stood in January.

An uptick in consumer confidence

After a gloomy autumn, Americans seemed to grow a bit more cheerful about the economy as the holidays approached. The Conference Board's index of consumer confidence inched up in December to 88.6 from November's upwardly revised 87.8, ending a four-month string of steep declines. A close look at the numbers suggests that while consumers are still pessimistic about current economic conditions, expectations for the future brightened. Still, economists noted that the index remains low by historical standards.

Durable-goods orders disappoint

New orders for durable industrial goods, a closely watched gauge of future economic performance, were up a meager 0.1% in November, falling far short of the expected 3.0% increase. A surge in orders for civilian aircraft helped offset declines in other areas—including a 24% drop in defense orders—but analysts said overall demand was dampened by persistent business pessimism and the consumer credit crunch. Business inventories and unfilled orders remained stubbornly high, hinting at more lean months to come for the manufacturing sector.

The economic week ahead

Economic analysts will ring in 2008 with a fresh batch of data, including the latest figures on existing-home sales, construction spending, factory orders, and two reports on economic activity from the Institute for Supply Management. In addition, the Federal Reserve Board's Open Market Committee will release the minutes from its December meeting, giving market watchers some insight into Fed policymakers' thinking about the year ahead.