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Perspectives

Key US data releases and events

Published: 1/25/2013
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Home sales drop on low inventory in December. The January jobs report and a Fed meeting are on tap next week.



Week in review. Housing data dominated the indicator calendar this past week. Existing home sales fell 1.0% and new home sales dropped 7.3% in December. Mortgage applications (to purchase) rose 2.5% last week, while the FHFA purchase-only price index increased 0.6% in November. One interesting aspect about the unexpected drop in existing home sales is that a lack of supply may be responsible, as opposed to a lack of demand. Inventories of unsold pre-owned homes dropped to an 11-year low last month. There are a number of reasons for this, including low home prices, underwater mortgages, and a clogged foreclosure pipeline. This is a positive for home builders, whose optimism has been growing recently, since they will face less competition. It also means that if home demand continues to grow—driven by household formation, job creation, and low mortgage rates—prices will rise. This in turn, should lure sellers back into the market and support home sales.

On the policy front, the House of Representatives has passed a bill to temporarily “suspend” the enforcement of the statutory federal debt limit (of $16.4 trillion) until 18 May 2013. Senate Majority Leader Harry Reid has indicated that the Senate would pass the bill without amendments, and the White House has so far stated that it would not oppose the bill. With the debt-ceiling time-bomb defused for now, Congress will focus on the need to offset the sequester spending cuts scheduled for 1 March 1, and on passing a continuing resolution to fund the government through the second half of fiscal 2013 (past 27 March).

Week ahead. This week brings an exceptionally heavy data calendar, which culminates with the critical January jobs report on Friday. We expect that 165,000 jobs were created, up from 155,000 in December, and a slight decline in the unemployment rate. But before that comes the fourth-quarter GDP report on Wednesday. We expect that real GDP grew 0.3%, a major slowdown from the third quarter’s 3.1% pace. A big reversal in government defense spending was the primary culprit. In nondata events, the Federal Reserve meets for the first time this year on Tuesday and Wednesday. After switching to threshold guidance for interest rates and expanding QE3 in December, we expect the Fed to take a breather at this meeting. In other data news, the S&P/Case-Shiller Home Price Index should show widening increases in home prices, while the ISM Manufacturing Index should edge up slightly. Consumer sentiment likely slipped in January on debt-ceiling concerns. Finally, light-vehicle sales are expected to put up another solid month in January, remaining above 15-million units annualized.

Monday, 28 January – Durable Goods Orders (Dec.)

  • IHS Global Insight: 3.2%
  • Consensus: 1.9%
  • Last Actual: 0.8% (Nov.)

What to look for

  • A boost from aircraft orders

Implications

Durable goods orders should rise 3.2% in December, but almost all of the gains are in aircraft. Motor vehicles continue to score gains, but the machinery sector should be a drag after three consecutive solid gains.

Tuesday, 29 January – S&P/Case-Shiller Home Price Index (Nov.)

  • IHS Global Insight: 5.4%
  • Consensus: 5.6%
  • Last Actual: 4.3% (Oct.)

What to look for

  • Widening increases in home prices

Implications

The S&P/Case-Shiller Home Price Index should show wider increases in home prices, in line with the FHFA and CoreLogic price indexes. We expect that the seasonally adjusted index will be up 0.5%, month on month, or 5.4% year on year.

Tuesday, 29 January – Consumer Confidence (Jan.)

  • IHS Global Insight: 62.4
  • Consensus: 64.0
  • Last Actual: 65.1 (Dec.)

What to look for

  • Another decline in confidence

Implications

The Conference Board's Consumer Confidence Index likely took another hit in January due to expiry of the payroll tax cut (smaller paychecks) and the political bickering over the debt-ceiling crisis.

Wednesday, 30 January – Gross Domestic Product (Q4, first estimate)

  • IHS Global Insight: 0.3%
  • Consensus: 1.2%
  • Last Actual: 3.1% (Q3, third estimate)

What to look for

  • Slower inventory accumulation and lower defense spending cut GDP growth

Implications

GDP growth will slow sharply to just 0.3% in the fourth quarter, from 3.1% in the third. This is not as bad as it looks, and does not point to an economy on the verge of recession. Faster inventory accumulation and a spike in defense spending caused growth to accelerate in the third quarter, and both of these factors will temporarily go into reverse in the fourth quarter. We expect slower inventory accumulation to cut 0.7 percentage point from the growth rate, and lower defense spending to deduct a full 1.0 percentage point. There should be good news in some of the spending components, notably business fixed investment, which should rebound after a drop in the third quarter. Also, consumer spending growth should improve. But exports are expected to be down sharply.

Wednesday, 30 January – FOMC Meeting and Statement

  • IHS Global Insight: 0.00—0.25%
  • Consensus: 0.00—0.25%
  • Last Actual: 0.00—0.25%

What to look for

  • No change in policy

Implications

The Fed will take a breather at this meeting.

Thursday, 31 January – Employment Cost Index (Q4)

  • IHS Global Insight: 0.5%
  • Consensus: 0.5%
  • Last Actual: 0.4% (Q3)

What to look for

  • Subdued wage inflation

Implications

Wage inflation remains contained in both private industry and state and local government: good news for employers, not-so-good news for workers. The Employment Cost Index should come in with a tame 0.5% increase.

Thursday, 31 January – Personal Income and Consumption (Dec.)

Personal consumption, nominal

  • IHS Global Insight: 0.1%
  • Consensus: 0.3%
  • Last Actual: 0.4% (Nov.)

Personal consumption, real

  • IHS Global Insight: 0.1%
  • Last Actual: 0.6% (Nov.)

Personal income

  • IHS Global Insight: 1.5%
  • Consensus: 0.8%
  • Last Actual: 0.6% (Nov.)

Core PCE inflation

  • IHS Global Insight: 0.0%
  • Consensus: 0.1%
  • Last Actual: 0.0% (Nov.)

What to look for

  • A strong bounce in income, but weak spending growth

Implications

Personal income likely increased 1.5% in December, since many companies pulled forward their quarterly dividend payments due to impending fiscal-cliff fears. Consumer spending should slow to a 0.1% increase after a robust November. Core inflation should be flat, slowing to a 1.3% year-over-year pace.

Friday, 1 February – Employment Report (Jan.)

Nonfarm payrolls, change

  • IHS Global Insight: 165,000
  • Consensus: 153,000
  • Last Actual: 155,000 (Dec.)

Unemployment rate

  • IHS Global Insight: 7.7%
  • Consensus: 7.8%
  • Last Actual: 7.8% (Dec.)

Average hourly earnings

  • IHS Global Insight: 0.1%
  • Consensus: 0.2%
  • Last Actual: 0.3% (Dec.)

What to look for

  • Continued gradual growth

Implications

We expect nonfarm payrolls to rise 165,000 in January, slightly better than the 155,000 increase in December, as the labor market continues to improve gradually. The recent bout of severe cold weather came too late in the month to damage the payroll figures. We expect the unemployment rate to edge down to 7.7%, from 7.8% in December.

Friday, 1 February – Construction Spending (Dec.)

Construction put-in-place

  • IHS Global Insight: 0.2%
  • Consensus: 0.5%
  • Last Actual: -0.3% (Nov.)

Construction excl. residential improvements

  • IHS Global Insight: 0.3%
  • Last Actual: -0.2% (Nov.)

What to look for

  • More residential construction spending

Implications

Construction spending for December will come in at 0.2%, with increases in residential spending offsetting declines in private nonresidential and public spending.

Friday, 1 February – ISM Manufacturing Index (Jan.)

  • IHS Global Insight: 51.0
  • Consensus: 50.5
  • Last Actual: 50.7 (Dec.)

What to look for

  • Manufacturing ticks up

Implications

The ISM for manufacturing should drift higher on weak regional results but a firmer national Markit PMI.

Friday, 1 February – Reuters/University of Michigan Consumer Sentiment Index (Jan., final)

  • IHS Global Insight: 70.1
  • Consensus: 71.4
  • Last Actual: 71.3 (Jan., preliminary)

What to look for

  • Another decline in sentiment

Implications

The Reuters/University of Michigan Consumer Sentiment Index likely slipped 2.8 points in January, to 70.1. Consumers were worried over the debt-ceiling crisis, after getting off the fiscal cliff. In addition, smaller paychecks due to the expiry of the payroll tax cut are dragging the consumer’s mood down.

Friday, 1 February – Motor Vehicle Sales (Jan.)

  • IHS Global Insight: 15.2 Million
  • Consensus: 15.2 Million
  • Last Actual: 15.3 Million (Dec.)

What to look for

  • Another strong month

Implications

After a strong end to 2012, US light-vehicle sales are expected to begin 2013 with another solid month. Consumers remained motivated by a continuation of some year-end clearance incentives by the auto companies.

by Nigel Gault and Patrick Newport

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