VIRGINIA BEACH, VA, February 3, 2007 -- The flood of economic data released last week (Jan. 29 - Feb. 2, 2007) was loaded with good news, says Jim Flinchum, a Virginia Beach-based expert on economics and investing.

“There was a lot of good news contained in an avalanche of economic data released last week. The Dow and Russell 2000 set new highs, which strongly suggests the bull market is broad and deep, with both big companies and small companies doing well. The GDP grew a very impressive 3.5% in the fourth quarter, higher than expected, while labor costs grew only 0.8%, less than expected. The impressive growth in GDP was fueled by a 0.7% increase in consumer spending, more than expected. The number of unemployment claims dropped by 20,000 last week. After declining four straight months, pending home sales actually rose 4.9%. After all that good news, it is not surprising that Consumer Confidence rose to an amazing 96.9 last month, compared to 91.2 in January 2006 and 91.7 in December.

“Even the dour Fed seemed more confident, saying 'Recent indicators have suggested somewhat firmer economic growth' along with 'some tentative signs of stabilization . . . in the housing market.' Saying that 'Inflation seems likely to moderate,' the Fed left interest rates unchanged.

“Of course, there is always conflicting data. Largely due to high inventory levels in houses and autos, the ISM manufacturing index turned negative, indicating a contracting economy. However, with inventory levels dropping at the fastest rate in 20 years, this should correct. The national savings rate got even worse, dropping from a negative 1.0% in November to a negative 1.2% in December. These are the worst numbers since the depths of the Great Depression in 1933. However, the U.S. computes this rate differently from most industrialized countries because we include expenditures for infrastructure (like roads and dams which last for decades) in the same spending as clothes. Lastly, home construction dropped 19.2% in the fourth quarter, shaving 1.2% off the GDP growth. This is the worst showing since 1991. But, with pending new home sales picking up, this should also correct.

“Bay Capital Advisors was early in predicting the housing collapse would end with a 'soft landing.' The slowdown expected in the early part of the year will probably be somewhat less than expected, which reduces the probability of any Fed cut this year. More importantly, we still expect above-trend stock performance for this year.”

In your continuing coverage of this story, feel free to call Jim for comment, analysis or background at (757) 641-3378. His views on the economy and investments can be found at http://www.baycapitaladvice.com/media-coverage.asp.

About Jim Flinchum
Flinchum is the managing principal of the financial planning and investment company Bay Capital Advisors in Virginia Beach. His deep understanding of the financial world, national and global economics, and investing make him an outstanding Expert Resource for your articles. For more than 35 years he worked in senior-level positions for some of America's premier banking institutions, taught economics for the American Institute of Banking and the University of Texas, and served as a gubernatorial appointee to the State Depository Board.

Jim Flinchum contact
jim@baycapitaladvice.com, (757) 641-3378