Markets and investors have been totally distracted this week by the upcoming FOMC meetings and the BoJ rate decision and political problems in Europe that we have not focused on hard core economic data. This week has a lot in store outside of those main events. Especially at the end of the week with US GDP.
During the first three months of the year, the US economy is expected to have expanded by 2.5% Q/Q (annualized), down from 3.0% Q/Q (annualized) in the final quarter of 2011. We believe that the risks are on the upside of expectations. Household consumption probably picked up further, while the drag from government consumption should be lower. On the other side, the boost from change in inventories will not be repeated and also fixed investments will contribute less.
Looking at today’s data, Conference Board’s consumer confidence is forecast to stay broadly stable compared to the previous month. The consensus is looking for a marginal drop from 70.2 to 69.8 in April, after already a slight decline in March (from 71.6 to 70.2).
Most recent consumer confidence indicators showed a mixed picture as University of Michigan consumer confidence hovered broadly sideways, while the Bloomberg measure extended its upward trend. We believe that the risks remain on the downside especially as there is some uncertainty regarding the labor market developments.
The Richmond Fed manufacturing index weakened sharply in March (from 20 to 7) and is forecast to remain unchanged at 7 in April. We believe that the decline might have been a bit exaggerated and therefore don’t exclude an upward surprise this month. Finally also today, the US new home sales will be released. After two consecutive declines, US new home sales are forecast to have increased again in March.
The consensus is looking for an increase by 2.2% to a total level of 320 000. Any increase will probably be limited as sales are still constrained by low inventories and competition from existing homes which often sell at a lower price.
The extremely volatile pattern in durable goods orders is likely to persist in March. This is mainly due to sharp swings in Boeing orders. In March, Boeing orders will likely depress the headline figure which is expected to show a 1.7% M/M decline. Durables excluding transportation are forecast to have risen by 0.5% M/M after a strong 1.8% M/M rebound in February. We believe that the risks remain on the upside of expectations.
Finally it will be interesting to see whether the claims will drop significantly lower after the strongly higher outcomes over the previous weeks, which might have been influenced by the Easter holidays.
The consensus is already fairly optimistic as a drop from 386 000 to 375 000 is forecast in the week ending April 21.
As is the trend currently, we believe that previous week’s data might be upwardly revised and still see risks for another upward surprise in the week under review. In the coming weeks, we believe that the claims will trend lower, but this process might go somewhat slower.
