|
|||||||||
 |
|||||||||
|
|
 |
Key U.S. Data Releases and Events22 Feb 08Next week, relatively weak indicators on January home sales, January durable goods orders, and February consumer sentiment (final report) will likely reinforce the emerging picture of an economy that has already tipped over into recession. Fed Chairman Bernanke will provide semiannual testimony to the House on Wednesday. U.S. equity markets continued in a see-saw, volatile pattern last week, but slid lower on Thursday and Friday as a fresh set of economic indicators added to the weight of evidence pointing in the direction of an output contraction in early 2008. Next week, an additional set of relatively weak indicators on January home sales, January durable goods orders, and February consumer sentiment (final report) will likely reinforce the emerging picture of an economy that has already tipped over into recession. But that is not the only problem that the Fed is currently losing sleep over, as reports on producer prices and the personal expenditure deflators will point in the direction of further upward pressure on prices. On Wednesday, February 27, Federal Reserve chairman Bernanke will deliver the Fed's semiannual testimony to the House Financial Services committee. The Fed has already released its downwardly revised central tendency forecasts, so the testimony will be dissected for any additional clues on the Fed's read on the status of the economy, the ongoing severe stresses in the financial markets, and the additional problem of dealing with recent upward pressure on prices. Our read is that we have seen deterioration on all three fronts, so the key to the testimony will be how Bernanke perceives the Fed's next movesin light of ultimately fighting battles on all three fronts. With the recession wolves squeezing through the door, however, the Fed's priority will be to ensure that the downturn is contained to a "mild recession," rather than a nasty one. At some time in the future, the "re-entry problem" for the Fed will be how, when, and to what extent interest rates need to move back up again once the economy is back on a solid growth track. However, that battle waits on the wings for now and the Fed's immediate task is to contain the recessionary forces already unleashed. KEY U.S. DATA RELEASES AND EVENTS THIS WEEK Monday, February 25 Existing Home Sales (January) Global Insight: 4.76 Mil. What to Look For
Implications We expect existing home sales to continue to decline. The Pending Home Sales Index (PHSI) fell 1.5% in December. Its latest two monthly readings point to 23% drops in existing home sales during both January and February. Based on the PHSI, we project that existing home sales dropped to 4.76 million units (annualized) in January. Tuesday, February 26 Producer Price Index (January) Total Core What to Look For
Implications We expect producer prices to rise 0.3% in January, as food and energy prices take opposite tacks. Energy prices continue to soften after their double-digit November surge, but look for another rise in food prices after a 1.3% jump in December. Most other price measures have shown acceleration in January, and we expect the core PPI to do the same (rising 0.3%, up from 0.2% in December). In the Fed's eyes, this one will go largely unnoticed after the January acceleration in core consumer prices. Wednesday, February 27 Durable Goods Orders (January) Global Insight: -5.1% What to Look For
Implications Little is likely to be good in the durable goods report. Orders are expected to post a 5.1% decline. Boeing's aircraft orders plunged from a frenetic pace in December and will be a major drag, but defense orders were outsized in December and are also primed for a reversal, as are orders for more conventional goods. A wildcard could be about $10 billion of November/December aircraft orders that Boeing has reported that have never shown up in the Census data. Overall, durable goods orders have been very noisy in recent months, with strong export orders offset by weak domestic demand. Nevertheless, the January report will add to the perception that the economy has already slipped into recession. Wednesday, February 27 New Home Sales (January) Global Insight: 0.592 Mil. What to Look For
Implications New home sales most likely continued to drop, despite aggressive price-cutting by builders, because credit markets have tightened. For January, we project that sales dropped to 592,000 units (annualized). We also expect downward revisions in sales for the prior three months. Thursday, February 28 Real Gross Domestic Product (Preliminary Q4) Global Insight: +0.6% What to Look For
Implications We expect revised fourth-quarter GDP growth to come in at 0.6%, the same as the advance estimate. Net exports added more to growth than originally thought, but there should be a combination of offsetting downward revisions in business equipment spending, construction, consumer spending, and inventories. All this leaves the economy just keeping its head above water as the year closed. Friday, February 29 Personal Income, Consumption and Prices (January) Personal Consumption, Nominal Personal Consumption, Real Core PCE Price Index Personal Income What to Look For
Implications Personal income likely rose a modest 0.2% in January. With respect to spending, core retail sales jumped 0.4% in January, but auto sales slumped from 16.2 million to 15.3 million units (annual rate). Added up, we project that consumer spending rose 0.2% in January. Adjusted for inflation, which we expect to be reported at 0.4%, spending dropped 0.2%, a weak start to the first quarter. We expect the core PCE deflator to be up 0.3% in January, from 0.2% in the previous three months. On a year-on-year basis, the core PCE should remain steady, at 2.2%, but the Fed will be disappointed to see no improvement. Favorable rounding might deliver a 0.2% m/m and 2.1% y/y outcome, but that would still leave the Fed concerned about a pickup in core inflation over the past few months. The bottom line here is that we continue to see pipeline pressures on core inflation flowing from the sharp runup in crude oil prices. At the same time, real consumer spending continues to weaken, and the economy is tipping into recession. Clearly, this is not an enviable situation to be in from the Fed's perspective. Friday, February 29 Univ. of Michigan's Index of Consumer Sentiment (Final, February) Global Insight: 69.6 What to Look For
Implications Consumer sentiment is nose-diving, and that presents additional downside risks to consumption spending in the first quarter of 2008. by Brian Bethune and Nigel Gault
|
|
 |
||
| Copyright ©2009 GLOBAL INSIGHT, Inc. | Site Map • Terms of Use • Privacy Policy | |