Key U.S. Data Releases and Events

It may take quite a bit more policy force to break the back of the recession. Delays and backsliding by the Federal Reserve on its major balance-sheet programs in January were not helpful, and the absence of a more-detailed blueprint for dealing swiftly with severe pressures in the financial system is not constructive either. This has contributed to a speculative frenzy on possible bank nationalization.

Economic reports next week will not do much to allay these concerns. Consumer confidence measures for February as a whole are expected to sink, total new and existing home sales should show declines in January, durable goods orders likely took a large negative hit, and the decline in real GDP in fourth-quarter 2008 is expected to be more severe than previously reported.

KEY U.S. DATA RELEASES THIS WEEK

Tuesday, February 24 – Conference Board Consumer Confidence (Feb.)

• Global Insight: 34.0
• Consensus: 36.0
• Last Actual: 37.7 (Jan.)

What to Look For

• Consumer sentiment is expected to hit a new low in February.

Implications

More job losses, a declining stock market, and an uptick in gasoline prices have dampened consumer attitudes in February. The Conference Board's Consumer Confidence Index is expected to fall from 37.7 in January to a new low of 34.0 in February in response to the deteriorating job market.

Wednesday, February 25 – Existing Home Sales (Jan.)

• Global Insight: 4.78 Mil.
• Consensus: 4.80 Mil.
• Last Actual: 4.74 Mil. (Dec.)

What to Look For

• A small increase in existing home sales.

Implications

The Pending Home Sales Index rebounded 6.3% in December, pointing to stronger existing home sales numbers in January. Our projection is for an uptick to 4.78-million units (annual rate) last month.

Thursday, February 26 – Durable Goods Orders (Jan.)

• Global Insight: -8.0%
• Consensus: -2.5%
• Last Actual: -2.6% (Dec.)

What to Look For

• Orders likely lurched downward in January, as cancellations were high and efforts to reduce inventories have been re-doubled.

Implications

January durable goods orders will probably be awful. Not only will last month's spike in defense orders mostly reverse, but motor vehicle orders should be down steeply, more Boeing aircraft orders were cancelled than new orders were taken, and all other sectors should be hit hard by the recession. The forecast calls for an 8.0% drop in durables orders, which is extreme, but it could be much worse, as a double-digit drop is plausible.

Thursday, February 26 – New Home Sales (Jan.)

• Global Insight: 0.305 Mil.
• Consensus: 0.325 Mil.
• Last Actual: 0.331 Mil. (Dec.)

What to Look For

• New home sales are expected to drop to 305,000.

Implications

The market for single-family homes continued to slump in January, according to January's single-family housing starts and permits numbers, as well as the NAHB/Wells Fargo Housing Market Index. Based on these readings, we project that new home sales dropped another 8% in January, to just over 300,000 units (annual rate).

Friday, February 27 – Real Gross Domestic Product (Preliminary Q4)

• Global Insight: -5.3%
• Consensus: -5.4%
• Last Actual: -3.8% (Advance Q4)

What to Look For

• Real GDP growth in fourth-quarter 2008 is expected to be revised down from minus 3.8% to minus 5.3%.

Implications

We expect the initial 3.8% decline announced for fourth-quarter GDP to be revised to a 5.3% drop, bringing it into line with original expectations for the quarter. Part of that revision is good news, since it now appears that inventories fell rather than rose during the quarter. That implies less of an inventory overhang—but inventories are still far too high relative to sales. The rest of the revision is just plain bad news, with exports, nonresidential construction, and state and local construction all falling more sharply than first thought.

Friday, February 27 – Michigan Consumer Sentiment Index (Final Feb.)

• Global Insight: 56.5
• Consensus: 56.2
• Last Actual: 56.2 (Preliminary Feb.)

What to Look For

• Sentiment is expected to see a small bounce in the final February reading.

Implications

The Reuters/University of Michigan's Index of Consumer Sentiment is projected to average 56.5 this month, up from 56.2 in early February, but still below the January reading of 61.2. The ABC News/Washington Post consumer comfort index improved in mid-February, as consumers got a lift from enactment of the $787-billion fiscal-stimulus package. Real consumer spending on goods and services is projected to decline at a 2.0–2.5% annual rate in the first quarter, before getting some help from federal transfer payments in the spring.