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Wrestling Match

August 16, 2011 – 5:08 pm

There was little in the way of economic reports for Monday except for mild interest in the Home Builder index which came in at 15. That is a very low number indicating that home builders are very depressed about their industry. That was followed with Tuesday’s New Housing Starts report for July which was down 1.5% month over month. The expectation was for 600,000 new starts and it came in at 604,000. Single family home construction fell 4.9% but apartments rose by 9% the only bright spot in the report. Foreclosures are putting a lot of pressure on the new homes industry.

Even though Europe and Germany in particular showed less than one percent growth in their second quarter GDP and that put downward pressure on our market at the opening, our Industrial Production number was a pleasant surprise at .9% growth. Taking out autos which came in very strong, the overall industrial production number was still stronger than expected and May and June were revised upward.

It appears, outside of new home construction which is low but steady, our economy is struggling to exit the soft patch while Europe is entering one.

There is no doubt there is going to be a continuing slow process to exit our recession hangover. Jobs are hard to find and housing is mired in a slump, but corporate earnings are very strong and we seem to be gaining a little strength in the economy. That certainly sounds like the formula for ‘struggle’. It’s a wrestling match with growth having the edge over shrinkage, but we have that third contestant, Europe, stepping into the ring trying to affect the outcome. The gorilla in the room, China, is sitting in the corner just watching but you can’t count them out of this match; everyone sees the gorilla, hoping his influence will eventually win the contest for everyone.

Good Trading
Steve Peasley

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