Consumer is king!

Yesterday's U.S. durable goods orders and home sales figures painted a mix picture regarding the economy. On the one hand we saw a pick up (and a clear relief for some) in durable goods orders for the month of march after disappointment a month earlier. This could suggest a rise in capital expenditure as inventories shrink, a welcome development following the worrisome cut in corporate spending. On the other hand, we saw further evidence that the housing slump had not bottomed out as some pundits were suggesting. New home sales came below expectations, similar to the disappointing existing home sales figures released earlier in the week. The key lies with how consumers are likely to react to the housing debacle, and so far things are not looking too shabby apart from the occasional red flag such as the recent consumer confidence figures. In addition, with rising oil prices and a weakening dollar, inflation is likely to remain on the Fed's radar screen and constrain their ability to loosen for some time to come.