So How is the Economy Doing?

Last Week we were treated to a bounty of economic numbers about the U.S. economy not too mention Bernanke's testimony in front of Congress. So what did we learn and which numbers were important?

Retail Sales - Came in lighter than the expected .4% at .3% for January, but December was revised up to 1.3% from 1%. Perhaps some sales were accelerated to December, but I wouldn't read too much into this number until we see a trend.

Core PPI - The Core number came in at the expected .2%. This is significant as it continues a decelerating trend that shows inflation is in check and gives the Fed room to relax.

Housing Starts - Housing starts came in really lite at just over 1.4 million in stark contrast to what the market expected at 1.6 million. Well this is great news to me. It demonstrates builders adjusting supply to current market conditions. As the current housing market is going through a "speculative supply correction", the quicker inventory goes down, the sooner the market will come into balance. So low starts are a good thing.

Industrial Production - Was negative at -.5% giving way to some slowing. This helps inflation, but continued decleration would not be welcome, especially since 4 out of the last 5 months have disappointed.

Capacity Utilization - For January was 81.2% less than the expected 81.7% and less than the previous month's 81.8%. Again, in my opinion this gives the Fed room to duck and cover with waning inflation pressures.

So what's the overall prognosis? Steady as she goes, with no alarm bells, a bit more slowing than expected, and enough to let the Fed get out of the way and watch for awhile, perhaps the reason the Dow Jones hit another all time high and the major indexes all moving up 1% for the week. And is inflation in check? Well the 10 year treasury rate backed down below 4.7% to finish the week at 4.69%.