The week ahead: leading indicator should indicate US recovery will continue in the months ahead

This is an exerpt from our weekly Top Down Outlook:

NAHB housing market index (Wednesday 20) – Notwithstanding the improvement over recent months, the real estate sector remains very weak. This was reflected in the NAHB housing market index, which fell from 17 to 16 in December. With the labour market failing to reverse the negative trend of the last two years and foreclosures expected to rise in the months to come, we do not expect a rebound in the real estate sector over the short term. The NAHB housing market index is likely to remain unchanged at 16 in January.

Leading indicators (Thursday 21) – The leading indicator are likely to continue the upward trend of recent months, rising by 0.6% m/m in December. The steep yield spread and the fall in weekly jobless claims are likely to be the major contributors to an increase in the leading indicators. The leading indicators should anticipate that the US economic recovery is likely to continue in the next six months.

Philadelphia Fed (Thursday 21) – The Philadelphia Fed went up for the fifth consecutive month in December, rising to 20.4 – the highest level since April 2005. We expect the index to continue its upward trend in January, rising to 27. The Philadelphia Fed should indicate that industrial production recovery will continue in early 2010 as global economic recovery gathers momentum and the weakness of the US Dollar boosts exports.