Ian Shepherdson Current Quotations

Mr. Greenspan said next to nothing about the current economic situation in his testimony, ... does not sound to us like a signal he has changed his mind on the appropriateness of the current level of interest rates. The rest of the testimony was a clear and unambiguous plea to Congress not to abandon fiscal discipline.

Given the complete absence of meaningful inflationary pressure evident in the economy now, and -- as the Fed put it, 'tentative evidence of a slowing in certain interest-rate sensitive sectors of the economy' -- we think there is very little chance that rates will rise again in the current cycle.

Looking forward, we can be unequivocal: New home sales have to fall, because the level of demand for new mortgages for house purchase recently has not been sufficient to sustain current sales rates.

Just about everyone who buys a house uses a mortgage, so a sustained drop in mortgage demand tells you where home sales are going, regardless of the current sales data.

With unemployment set to breach 6 percent over the next few months, people's view of the current economy is bound to deteriorate, ... But expectations are what matter for spending, and at this level the numbers suggest consumers spending will rise, albeit not rapidly.

Unfortunately, at current levels, and coupled with the extraordinarily low level of labor demand, the claims numbers are still consistent with flat or falling payrolls and a rising unemployment rate. There's no real relief in sight here yet.

In the short-term, these data will reinforce the impression that the housing market is proving resilient in the face of higher mortgage rates, ... it will not last, because the current trend in home sales is not high enough to support this rate of house building in the medium-term.

By early next year we expect starts to have begun to decline, though activity can probably remain close to current levels for another couple of months,

The key number in this report, in our view, is the rise in the supply of homes for sale. There are now 14.4 percent more homes for sale than a year ago, while actual sales are up just 3.3 percent. With mortgage demand slipping a bit and supply rising, price gains cannot continue at their current pace.

If claims remain at their current level, we could expect the unemployment rate to be down to 4 percent or so by mid-summer.