The following review of economic trends is based on information available as of December 15, 2005.

As summer yielded to autumn, the domestic economy was sailing in treacherous waters as New Orleans was inundated due to Hurricane Katrina. The worst-case scenarios never materialized and the economy continued to cruise along at a 4.3% growth rate, according to the U.S. Commerce Department. The price of crude oil stabilized, although energy costs are now front and center of future economic calculations.

Wholesale prices increased 0.7% in October, based largely on energy costs, according to the U.S. Labor Department. Meanwhile, the Producer Price Index core rate (which ignores volatile sectors such as energy) actually decreased as prices for motor vehicles and clothing fell. The core Consumer Price Index (CPI) rose 0.2% in both October and November. The CPI has risen 3.5% over the 12-month period through November, which is down from the 4.3% pace set in the 12 months ending October 31. The Fed can be expected to keep an eagle eye on developments in this arena as it remains determined to keep inflation from slipping out of its grasp.

The Conference Board Consumer Confidence Index dropped sharply in September, but rebounded significantly in November.

In the stock market, energy issues bounced downward during the fourth quarter after outpacing all other sectors through the first nine months of 2005. Utilities reacted similarly, although they, too, remained in the black by double digits. Although consumer discretionary and telecom were both up for the fourth quarter, they were still contending for the dubious honor of worst performer of 2005. Both sectors were down in excess of 4% as of December 15, 2005. Mid-cap stocks were the best performers during the fourth quarter.

Yields on 10-year Treasury notes continued a steady rise, hovering around 4.5%, a more-than-10% increase since mid-year.

Source: The Wall Street Journal

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The above article is for general information only and is not intended to provide specific advice or recommendations for any individual. Consult your attorney, accountant, or financial or tax adviser with regard to your individual situation.

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