Key U.S. Data Releases and Events

The other major development to watch will be the comprehensive housing bill, which has been working its way through the machinery of Congress for perhaps too many months. This bill has assumed much greater urgency in view of the ongoing pressures in the housing and mortgage markets, and the associated distress over the capital adequacy of many major financial intermediaries. There may also be further discussion on Capital Hill of another economic stimulus bill.

In this vein, reports on the housing markets next week are not expected to point to any light at the end of the tunnel. New and existing homes sales are likely to have declined in June, while house prices came under further downward pressure in May. In other economic reports, durable goods orders probably sank in June due to a downdraft in aircraft orders, and July consumer sentiment is expected to slide down the skids further.

KEY U.S. DATA RELEASES THIS WEEK

Tuesday, July 22 – OFHEO House Price Index (May)

Global Insight: -0.8%
Consensus: -0.5%
Last Actual: -0.8% (Apr.)

What to Look For

• The home price index (HPI) is expected to decline by 0.8% in May.

Implications

Inventories remain at or near record levels. As a result, house prices are dropping nearly everywhere. For May, we project that the HPI dropped 0.8%, same decline as in April.

Thursday, July 24 – Existing Home Sales (Jun.)

Global Insight: 4.90 Mil.
Consensus: 4.94 Mil.
Last Actual: 4.99 Mil. (May)

What to Look For

• Sales are expected to decline by 1.8%.

Implications

The Pending Home Sales Index dropped 4.7% in May, after jumping 7.1% in April. The May indices were down in all four regions. The latest two monthly readings point to flat sales during June–July. For June, we project a decline to 4.90-million annualized units.

Friday, July 25 – Durable Goods Orders (Jun.)

Global Insight: -2.4%
Consensus: -0.3%
Last Actual: 0.0% (May)

What to Look For

• Orders are expected to have fallen 2.4%.
• A sharp drop in aircraft orders of close to $4.0 billion.

Implications

The motor vehicle sector should provide some partially offsetting lift after six consecutive months of declining orders, but June aircraft orders were about the same as in May and will likely be pushed downward by seasonal adjustment. Boeing's backlog nevertheless continues to grow, as the company is booking three new aircraft orders for every two that it delivers, and has received as many orders in the first half of July as it did during all of last month. Most other durable goods industries should see a flat to weak June. Export orders have been driving the bus for durable goods industries for an extended period of time, but reports of tightening credit conditions in overseas markets could be a signal that tailwinds from export sources are likely to become much less forceful.

Friday, July 25 – Michigan Consumer Sentiment Index (Final Jul.)

Global Insight: 56.0
Consensus: 56.3
Last Actual: 56.6 (Preliminary Jul.)

What to Look For

• The index is expected to slip to 56.0 in July, down slightly from 56.4 in June and a preliminary July reading of 56.6.

Implications

Financial market instability, stock market declines, and job losses are creating more anxiety for consumers. Meanwhile, rising food and energy prices are eroding purchasing power. With the sentiment index at a 28-year low, real consumer spending is likely to decline in late 2008, once the fiscal-stimulus payments have ended. The potential negative hit on credit conditions from the recent escalation of financial pressures, plus the likelihood of a spending pullback in late 2008, has sparked discussion of another fiscal-stimulus package. Congress still has the comprehensive housing bill to move forward, so it would be premature to get distracted by another fiscal-stimulus bill, but this is a potential development that may gain momentum in the next few weeks.

Friday, July 25 – New Home Sales (Jun.)

Global Insight: 0.502 Mil.
Consensus: 0.505 Mil.
Last Actual: 0.512Mil. (May)

What to Look For

• New home sales are expected to decline by 2.0%.

Implications

A three-month moving average shows that in May, new home sales were still dropping nationally and in all regions, except the Midwest, where sales may be bottoming. We expect sales to continue falling over the next few months, because credit conditions in the mortgage market remain tight and may indeed get tighter. As important as the headline sales numbers are, the more important measure is inventories. During May, the number of unsold new homes fell for the 13th-straight month, while the number of completed homes for sale, which set a record high of 199,000 units in January, fell for the fourth-straight month. We anticipate declines in both the number of unsold new homes and the number of completed homes.