By Fred Arnold

The 2 key words for the week are…“Improvement”, ”Contagion”.

“Improvement”: Surprisingly we had one of the best economic data weeks we have seen in a long time.  You may not be able to tell that by the behavior of the stock market.  I will explain exactly why that is in just later.

1. The Producer Price Index shows for the first time in months that we are experiencing a decline in prices on the wholesale level.  The main contributor to the decline is lower energy costs. That is strange, it cost more to feed my car and my four kids?
2. Retail Sales continue to gain ground although at a slightly slower pace than September.  Sales jumped .5% in October which was at the high end of expectations.  The increase in retail sales continues to demonstrate that consumers are out there spending money a bit beyond necessities.
3. The manufacturing sector has reported that their latest assessment of business conditions is improving.  This latest assessment is the first time it has been in positive territory since May.
4. Consumer Prices also decreased last month dropping .1%.  With wholesale and retail prices declining it reinforces the fact that inflation is not a concern or a threat to the economy at this time.
5. Industrial Production also surged last month by .7% reflecting a strong rise in manufacturing output.
6. The Housing Market Index, which is an indicator of how the National Association of Home Builders perceives market conditions for new home sales, increased for the second straight month.
7. Housing Starts rebounded in September rising a sharp 15% after declining 7% last month.
8. First Time Jobless Claims not only dropped from last week, it is also the 2^nd consecutive week that claims are below 400,000.  (Actual number for last week is 388,000)

“Contagion”:  Despite almost all the economic news being positive this week, why is it that the stock market continues to decline? The answer is a simple one…”Contagion”.

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“Contagion” is referencing the concern over what is happening in Europe with the debt crisis. More and more reports are coming out that they do not have an agreement or effective plan for containing the financial crisis.  It is this crisis which not only threatens Europe, but virtually all other major financial markets around the world.  The news regarding this crisis is day to day and it appears that we will be living with this “disease” for quite some time as no clear resolution is in sight.

Have a fabulous weekend and Thanksgiving week, let’s hope these interest rates stay low!