Key U.S. Data Releases This Week

The Week Ahead

The U.S. economy probably grew more than 4% in the third quarter, pumped up by inventories, cash for clunkers, and the tax credit for first-time homebuyers. These are not the ingredients needed to support a V-shaped recovery. Indeed, IHS Global Insight expects the economy to grow just over 2% in 2010.

The tax credit for first-time homebuyers should give September new home sales (October 28) a boost. Similarly, autos will lift September durable goods orders (also October 28).

Not all of the releases will be upbeat. The personal income and outlays (October 30) release will show personal income and consumer spending dropping in September. Finally, the Conference Board's measure of consumer confidence (October 27) and the University of Michigan’s consumer sentiment index (October 30) should inch down, reflecting consumers still worried about their personal finances.

KEY U.S. DATA RELEASES THIS WEEK

Tuesday, October 27 – Conference Board Consumer Confidence (Oct.)

• IHS Global Insight: 52.5
• Consensus: 53.5
• Last Actual: 53.1 (Sep.)

What to Look For

• The Conference Board's consumer confidence index is projected to slip slightly in October, to 52.5.

Implications

Although consumers anticipate an economic recovery, they are uncertain about their income prospects and will spend cautiously.

Wednesday, October 28 – Durable Goods Orders (Sep.)

• IHS Global Insight: +2.5%
• Consensus: +1.0%
• Last Actual: -2.6% (Aug.)

What to Look For

• Durable goods orders should climb 2.5% in September, with a big lift up from autos offsetting a drag from aircraft.

Implications

Business investment is beginning to stabilize—at least for equipment. We expect business equipment spending to rise about 7% in the third quarter, with the gains concentrated in high tech and vehicles.

Wednesday, October 28 – New Home Sales (Sep.)

• IHS Global Insight: 0.446 Mil.
• Consensus: 0.440 Mil.
• Last Actual: 0.429 Mil. (Aug.)

What to Look For

• About a 4% increase in sales.
• Inventory will drop for the 29th straight month, to levels last reached in 1983.

Implications

New home sales will take a small hit once the tax credit for first-time homebuyers expires. The drop in inventory is good news because it points to rising housing starts even after the tax credit for first-time homebuyers expires.

Thursday, October 29 – Real Gross Domestic Product (First estimate, Q3)

• IHS Global Insight: +4.3%
• Consensus: +3.2%
• Last Actual: -0.7% (Third estimate, Q2)

What to Look For

• Third-quarter GDP growth is expected not only to turn positive, but to do so decisively, reaching 4.3%.
• Part of the bounce reflects a slower pace of inventory decumulation, which adds 1.3 percentage points to the growth rate. But that still means that final sales rose by 3.0%.
• We project that consumer spending, business equipment spending, residential fixed investment, and exports all turned positive in the third quarter, after second-quarter declines.
• Defense spending will likely show another strong increase.
• Nonresidential construction spending probably declined steeply, while imports were up sharply (meaning that foreign trade was a drag on growth).

Implications

We do not believe that 4%-plus growth is sustainable, because the inventory cycle's boost to growth will fade next year (although it will still be powerful in the fourth quarter), and credit constraints will restrain the expansion in consumer spending, housing, and business equipment spending. In addition, nonresidential construction still has a long way to fall.

Friday, October 30 – Employment Cost Index (Q3)

• IHS Global Insight: +0.3%
• Consensus: +0.4%
• Last Actual: +0.4% (Q2)

What to Look For

• For the third quarter, the increase in the employment cost index should come in at 0.3%, less than the 0.4% rise in the second quarter.
• The increase would be even smaller but for the boost from the minimum wage hike, along with state and local government compensation increases outrunning those in the private sector.

Implications

The threat of wage inflation—at least through next year—is low and receding, because the unemployment rate is so high.

Friday, October 30 – Personal Income, Consumption and Prices (Sep.)

Personal Consumption, Nominal

• IHS Global Insight: -0.4%
• Consensus: -0.5%
• Last Actual: +1.3% (Aug.)

Personal Consumption, Real

• IHS Global Insight: -0.6%
• Last Actual: +0.9% (Aug.)

Core PCE Price Index

• IHS Global Insight: +0.2%
• Consensus: +0.2%
• Last Actual: +0.1% (Aug.)

Personal Income

• IHS Global Insight: -0.2%
• Consensus: 0.0%
• Last Actual: +0.2% (Aug.)

What to Look For

• We are projecting a drop in September personal income, with several categories (including dividend income, personal interest income, and private wage and salary disbursements) in the red. The setback for wages and salaries reflects lower hours worked.
• The projected drop in consumer spending is payback for the "cash-for-clunkers" boost. Excluding autos, consumer spending should post respectable gains across most categories.
• For September, we project that the core consumption price index increased 0.2%, the same as the core CPI. Year-on-year, core inflation will inch up to 1.4%.

Implications

Real consumer spending is on track to expand at an annual rate of more than 3% in the third quarter, led by gains in autos and other durables. Looking ahead, we expect more-modest gains as job losses, tight credit, and depleted household net worth restrain consumer spending. Income growth will remain sluggish in the fourth quarter because of job losses. Core inflation should remain below 1.5% for quite a while, as the unemployment rate is likely to remain high for years.

Friday, October 30 – Michigan Consumer Sentiment Index (Final Oct.)

• IHS Global Insight: 69.0
• Consensus: 70.0
• Last Actual: 69.4 (Preliminary Oct.)

What to Look For

• The Reuters/University of Michigan index of consumer sentiment is expected to average 69.0 in October, slightly below its preliminary reading of 69.4.

Implications

The dip follows a dip in the ABC News/Washington Post consumer comfort index in the week ended October 18, reflecting the weak state of consumer finances, disappointing labor market news, and a rise in gasoline prices.