Key U.S. Data Releases and Events

KEY U.S. DATA RELEASES THIS WEEK

Monday, August 25 – Existing Home Sales (Jul.)

Global Insight: 4.92 Mil.
Consensus: 4.90 Mil.
Last Actual: 4.86 Mil. (Jun.)

What to Look For

• An increase in sales, possibly in all four regions.
• Falling house prices.

Implications

Existing home sales have hardly budged in eight months. Over this period, the pending home sales index (PHSI) has also been trendless, although it did bounce back in June. The May and June PHSI readings point to small increases in existing home sales during July and August. Afterward, we expect sales to slide because of deteriorating credit markets.

Tuesday, August 26 – New Home Sales (Jul.)

Global Insight: 0.519 Mil.
Consensus: 0.525 Mil.
Last Actual: 0.530 Mil. (Jun.)

What to Look For

• Another drop in sales.
• The inventory of unsold homes to drop for the 15^th-straight month.

Implications

The housing outlook has worsened recently. Credit is getting tighter for both builders and homeowners. Existing home sales have stabilized because plummeting prices of foreclosed homes have spurred sales. New home sales have continued to drop, however, because builders cannot slash prices as ruthlessly as banks have on foreclosed homes.

Wednesday, August 27 – Durable Goods Orders (Jul.)

Global Insight: 0.0%
Consensus: +0.1%
Last Actual: +0.8% (Jun)

What to Look For

• No change in durable goods orders.
• Aircraft orders should enjoy a modest rebound.
• Defense orders should fall back, after their best month in over a year and a half.
• The motor vehicle sector should remain weak, with only modest changes in orders.
• Nondefense capital goods orders (excluding aircraft) should lose some ground, a payback for strong June gains.

Implications

Export orders have been driving durable goods industries for an extended period of time, but reports of a tightening in credit conditions in overseas markets could be a signal that tailwinds from export sources are likely to diminish.

Thursday, August 28 – Real Gross Domestic Product (Preliminary Q2)

Global Insight: +2.7%
Consensus: +2.8%
Last Actual: +1.9% (Advance Q2)

What to Look For

• Second-quarter real GDP growth is expected to be revised up to 2.7%, from the advance estimate of 1.9%.
• A much-smaller-than-expected trade deficit in June suggests that the contribution of foreign trade to growth will be revised up to more than 3 percentage points, from the original 2.4 points.

Implications

The revision will emphasize the extent to which second-quarter GDP growth was supported by foreign trade. Domestic demand growth was negative in the advance release and should remain so in the revision. We do not think that trade will be able to prevent a slowdown in overall growth during the second half of the year. We expect slower GDP growth in the third quarter (around 1.5%) and an outright decline (of 0.7%) in the fourth quarter, as the fiscal-stimulus effect fades and consumer spending weakens.

Friday, August 29 – Personal Income, Consumption, and Prices (Jul.)

Personal Consumption, Nominal
Global Insight: +0.2%
Consensus: +0.3%
Last Actual: +0.6% (Jun.)

Personal Consumption, Real
Global Insight: -0.5%
Last Actual: -0.2% (Jun.)

Core PCE Price Index
Global Insight: +0.3%
Consensus: +0.3%
Last Actual: +0.3% (Jun.)

Personal Income
Global Insight: -0.5%
Consensus: 0.0%
Last Actual: +0.1% (Jun.)

What to Look For

• Personal income will drop by 0.5%.
• The core PCE deflator will rise 0.3% for the second-straight month.
• Real consumer spending will drop 0.5%.

Implications

We expect the stimulus rebates to add about $6.0 billion (which annualizes to $72 billion) to transfer payments in July, down from June's contribution of $12.5 billion ($150 billion annualized). Private wage and salary disbursements will be flat, but possibly negative. Overall for July, we expect a 0.5% drop in personal income.

On a year-on-year basis, look for the core PCE to rise 2.4%, a tick faster than the 2.3% rate recorded in the previous month. The steady drift above the top of the Federal Reserve's presumed 1.5–2.0% target band will make it harder for the Fed to downplay inflation risks as we move through the second half of the year. Nevertheless, dismal growth prospects should keep the federal funds rate at 2.0% into the first half of 2009.

Consumer spending fell in inflation-adjusted terms during June, and will probably fall again in July. For the third quarter overall, we expect a small inflation-adjusted increase in spending of about 0.5%. But there is a growing risk that the third quarter will see the first outright decline in consumer spending since the end of 1991.

Friday, August 29 – Michigan Consumer Sentiment Index (Final Aug.)

Global Insight: 62.2
Consensus: 62.0
Last Actual: 61.7 (Preliminary Aug.)

What to Look For

• A small rise in the sentiment index.

Implications

Consumer attitudes are getting a lift from falling gasoline prices. We expect that the Conference Board's consumer confidence index will edge up from 51.9 in July to 53.0 in August, while the University of Michigan's consumer sentiment index rises from 61.2 to 62.2. Yet, both of these readings will remain in a recessionary range, held down by concerns over rising unemployment, declining real wages, falling home prices, and tightening credit conditions.