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Friday, July 22, 2011

Wells Fargo's Weekly Economic Financial Commentary - July 22, 2011

- The Leading Economic Index rose 0.3 percent in June, as 5 of the 10 components posted gains and contributions from financial indicators such as the money supply and steep yield curve more than offset declining stock prices and consumer expectations.

- Housing starts rose 14.6 percent to a 629,000 unit pace in June due to a 30.4 percent jump in multifamily starts, which reflects the firming in the apartment market and steadily declining vacancy rates.

. Single-family starts, meanwhile, rose 9.4 percent and seem to be recovering from the lows reached following the end of the homebuyer tax credit program.

- Existing home sales slipped 0.8 percent in June to a 4.77 million unit pace, as the National Association of Realtors reported that contract cancellations spiked 16 percent, the highest on record.

. The increase in cancellations likely reflects buyers and sellers increasingly running up against conservative appraisals and tight underwriting.

- Rating agencies have reported that the U.S. government’s AAA rating is not solely dependent on raising the debt limit, but also on fixing the longer-term funding gap.

. Our baseline expectation is that Congress will likely strike a last minute deal to raise the debt ceiling, and the ramifications on the financial markets will be neutral in the short term.

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