NEW YORK (

TheStreet

) -- The week between Christmas and New Year's is unlikely to see lots of trading, but it will bring a raft of economic reports highlighting key issues for the market as it heads into the new year.

This week, an upward revision to GDP helped the market to continue its recent rally. In the coming week, two key real estate indicators, the December Consumer Confidence Index, and China's monthly report on purchasing managers activity will headline the economic calendar.

Although more traders may be on vacation next week than any other week of the year, that doesn't mean they won't be logging in remotely and scrutinizing the numbers from China.

Chinese inflation and Chinese government efforts to prevent the country's economy from overheating have been key issues in 2010 that will continue to drive market sentiment in 2011. On Saturday, inflation worries prompted

Bejing to raise interest rates

.

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The release of the monthly Purchasing Managers Index (PMI), along with subindices that track input prices such as the Producer Price Index, will help reveal how torrid China's growth remains and provide clues about how aggressive China's central planners will be in applying the brakes to the economy.

This week, Chinese bonds were Asia's worst performers because of concerns that China's central bank would have to raise interest rates. China's central planning agency said earlier in December that consumer prices were rising too quickly, and prices need to be controlled to protect the country's standard of living. Saturday's right hike was the second in a little more than two months and is unlikely to be the last.

"Surging inflation and sustained robust economic growth may prompt the central bank to raise interest rates five to six times next year," Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai, told

Bloomberg

recently.

The U.S. economy as a whole exhibited steady improvement throughout 2010, but it's the labor market, alongside housing, that remains a critical economic wild card in 2011, and both highlight the economic calendar for the year's last week, with the S&P/Case-Shiller Home Price Index and S&P/Case-Shiller Composite 20 City Index scheduled for release on Tuesday morning, and the November pending home sales report scheduled for Thursday.

The consensus view of the October Case-Shiller index is for a decline in the 20-City home pricing by 0.6%. Some economists, such as Wells Fargo's senior economist Mark Vitner, expect the decline to be a little higher.

Vinter is expecting a Case-Shiller decline of between 0.8% and 1%, though he stressed that the one-month number isn't really what matters and that the housing outlook is still far from rosy.

"Pending home sales should be weak, and there is continued uncertainty about the number and timing of foreclosures, and I really expect foreclosures to pick up next year," Vitner said.

The consensus call on pending home sales for November is an increase of 1%.

Gary Thayer, chief macro strategist for Wells Fargo's Advisory Services Group, thinks the real issue for housing is that even with home prices stabilizing, attractive mortgage interest rates from October and November have evaporated. "Mortgage rates going up means we will see a little slowdown in the housing recovery near term," Thayer said.

The Wells Fargo strategist said that this week's existing-home sales report was better, and the last pending home sales report showed improvement, but the real key is not the next backward looking report, but what's the trend going forward. "With mortgage rates back up, I don't expect a sharp improvement in housing," Thayer said.

Although housing doesn't appear set to catapult, there are some bright signs for the labor market.

Currently, there isn't enough job growth to improve labor market sentiment or bring down the actual unemployment number. However, corporate profits were at a record level in the last quarter, small-business owner sentiment has improved and temporary hiring has increased across all business sectors, not just retail holiday season hiring. All of these signals suggest to some economists that better job creation is coming in the first half of 2011.

One means of gauging the labor outlook is the December Consumer Confidence Index from the Conference Board. The index rose to its highest level since June in the previous month's report. Still, as economists are quick to note, a Consumer Confidence Index reading in the 50s is far from a high mark. No U.S. President has ever been re-elected with the Consumer Confidence Index in the 50s.

The consensus call on Tuesday's Consumer Confidence report is for an improvement of two points to a reading of 56. However, Wells Fargo senior economist Vitner says it's the Consumer Confidence survey questions specific to the labor outlook that matter more.

In last month's Consumer Confidence report, the labor market sentiment was mixed. A large 46.5% of respondents thought jobs were "hard to get", little changed from 46.3% in October. Only 4% of respondents thought jobs were "plentiful," although that was up from 3.5% in October.

Expectations about the labor market also improved in November, when the percentage of consumers expecting more jobs in the months ahead rose to 15.5% from 14.5%, and the proportion expecting fewer jobs fell to 18.8% from 22.3%.

"We haven't seen a whole lot of improvement in labor market, so any improvement in the questions related to labor would be a bigger sign of consumer confidence than the broad Consumer Confidence Index reading," Wells Fargo's Vitner said. "A reading of 56 is still pretty low. Economists like to see it in the 70s."

The Wells Fargo Advisory Services strategist Thayer noted that the National Federation of Independent Business survey, a key indicator of the small business owner sentiment, improved in November, and consumer sentiment readings have improved, too. In addition, the economy has probably strengthened in the fourth quarter compared with the final third-quarter GDP number released this week.

Thayer said that after the recent rally, investors are breathing a sigh of relief, and the last week of the year looks to be quiet.

"The big thing is that it takes a long time for the economy to recover, but the trend in the numbers suggests healing," the Wells Fargo strategist said. "Any individual report can cause volatility in the markets, but the trends have been favorable. That's making people feel a little better." However, Thayer added, "There's still high unemployment and weak housing."

The U.S. economy might be on the cusp of a new year, but the same old issues threaten to send it over the proverbial cliff.

-- Written by Eric Rosenbaum in New York.

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