Key US data releases and events

Optimism about “fiscal cliff” grows prematurely. Bond markets suffered modest losses earlier this week, when congressional Republicans and President Obama appeared to move closer toward an agreement on tax rates. At one point, the 10-year Treasury rate added 25 basis points, reaching 1.85%, the highest since October. But progress stalled at that point. And when House Speaker Boehner failed to rally his caucus behind his “Plan B” (which would have kept income tax rates in place for all income below $1 million), bond markets rallied and the S&P 500 dropped 1%. The data news this past week, however, was generally supportive of ongoing recovery, provided the fiscal cliff is avoided. Housing starts slipped a bit in November, although permits increased and existing home sales hit 5 million units. Third-quarter GDP growth saw a surprising upward revision, to 3.1%. The revisions were primarily to final sales and indicated that fourth-quarter growth might be better than initially thought. Personal incomes and spending rebounded in November, after a soggy October. But the fiscal cliff further dented consumer sentiment in mid-December, as the Reuters/University of Michigan’s index fell back toward its summer lows.

Fiscal cliff the focus, with housing in the background. The data calendar for the upcoming shortened holiday week focuses primarily on housing indicators. Case-Shiller home prices likely reached a 4% year-on-year advance in October, thanks to slowly rising demand and tight supply. And new home sales are expected to have advanced a modest 1.9% after several flat months. But the focus will once again be on the fiscal cliff, and policymakers have one more week to strike a deal before the January 1 deadline.

Wednesday, 26 December – S&P/Case-Shiller Home Price Index (Oct.)

• IHS Global Insight: 4.0% (year on year)
• Consensus: 4.0%
• Last Actual: 3.0% (Sep.)

What to look for

• A steady pace of improvement in house prices

Implications

The S&P/Case-Shiller Home Price Index is expected to have increased 0.4% in October, translating into a 4.0% year-on-year advance. Slowly rising demand and tight inventories continue to push up home prices.

Thursday, 27 December – New Home Sales (Nov.)

• IHS Global Insight: 0.375 Mil.
• Consensus: 0.380 Mil.
• Last Actual: 0.368 Mil. (Oct.)

What to look for

• A small increase

Implications

New home sales likely posted a 1.9% increase in November to 375,000. This would follow six months of flat readings, although homebuilders are increasingly optimistic about sales prospects.

Thursday, 27 December – Consumer Confidence Index (Dec.)

• IHS Global Insight: 62.6
• Consensus: 70.0
• Last Actual: 73.7 (Nov.)

What to look for

• Consumer confidence takes a major hit

Implications

The Conference Board's index will likely follow the Reuters/University of Michigan’s index with a 15% plunge in December, owing to concerns about the fiscal cliff. Will consumer spending follow?

by Nigel Gault and Paul Edelstein