Economic Highlights for the Week Ending April 6, 2007

Monday, April 2nd
The ISM manufacturing index fell to 50.9% in March from 52.3% in February. The level of the index portrays sluggish activity as manufacturers continue to work through an inventory correction cycle.
The economic data ran the gamut last week from weaker new home sales to stronger incomes and spending to robust, regional manufacturing activity. Also the Fed Chairman reiterated the need for vigilance against inflation and flexibility in monetary policy response. Interest rate expectations were little changed amid mixed economic data and Bernanke's remarks last week. Fed funds futures traders are expecting no change in the fed funds rate for the next three meetings in May, June and August. Traders have priced in roughly a 60% chance of a rate cut in September and fully priced in a cut at the October meeting.
Tuesday, April 3rd
The NAR reported that its pending home sales index rose to 109.3% in February from 108.5% in January. The index represents the number of signed contracts in February and is considered a leading indicator of existing home sales. The unexpected gain in the index should result in fairly stable demand for exiting homes in the next month or two.
Motor vehicle sales fell to a seasonally adjusted annual pace of 16.3 million units in March, down from a pace of 16.6 million in February. Weak fleet sales weighed on domestic auto manufacturers sales results last month while Toyota's sales increased 12%. Also, car sales rose modestly while truck sales declined as consumers shopped for more fuel efficient models.
Wednesday, April 4th
The ISM non-manufacturing index fell to 52.4% in March from 54.3% in February. Expectations were for a mild gain. Business activity in the service sector has slowed sharply in the last year or so but continues to expand modestly. This is in part related to the housing market correction. Weakness is expected in service sector growth going forward as the overall economy continues to slow.
Factory orders rose 1.0% in February after a 5.7% decline in January. A downward revision to durable goods orders led to the slower than expected increase in factory activity in February. The factory sector continues to pare down inventories under weakened demand. Manufacturing weakness will continue to detract from economic growth in Q1, possibly more so than in Q4.
The MBA mortgage applications index fell 3.2% to 649.5% for the week that ended March 30. Both purchase and refinancing activity decreased on the week but refinancing activity was up 27.9% from year ago levels. The purchase index was 8.1% below its year ago level. The decline in mortgage application activity indicates weaker housing fundamentals. The housing market is expected to weaken further this year before mounting any significant rebound.
Thursday, April 5th
Mortgage rates edged higher last week but gains were limited as the financial markets weighed the most recent economic data. The data remains mixed and the outlook for interest rates, the housing market and the economy is unclear. 30-year fixed rate mortgages averaged 6.17% this week compared to 6.16% last week according to Freddie Mac's mortgage market survey.
Jobless claims increased 11,000 to 321,000 for the week that ended March 31. Despite the gain, the four week moving average which smoothes out weekly volatility, continues to trend lower. Higher claims suggest additional layoffs last week however, the level of jobless claims remains relatively low indicating still tight labor market conditions.
Friday, April 6th

GOOD FRIDAY
Equity Markets Closed