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Get Four
|  | APRIL 21, 2006
Vital Signs: Economic Growth Heats UpFirst-quarter GDP should be the strongest in more than two years. Also on tap: March home sales, employment cost index, Federal Reserve's Beige Book, and moreThe first peak at first-quarter real gross domestic product should corroborate expectations that economic growth was impressive. Economists believe the economy grew at an annual rate of 4.9% last quarter. If growth comes in on target, though, it may feel a bit anticlimactic. Investors and economists, after all, are trying to get a handle on how the second quarter will turn out given the rising level of uncertainty surrounding energy, housing, and the Federal Reserve. Gasoline prices are soaring and Memorial Day is still more than a month away. The average price of gas in the U.S. is now $2.78 per gallon, vs. $2.24 a year ago. Crude oil in the U.S. has also broken through the $70 per barrel level quite easily. Gasoline inventories were quite high in March, but have since plunged to the lower end of average for this time of year. The uptrend in gasoline prices could rattle consumer confidence, although weekly chain-store sales figures have not shown much effect on spending in the past two weeks. The good news is that gas prices may level off or even ease as three refineries damaged by last year's hurricanes are soon expected to start operating. The March numbers on new and existing home sales should attract lots of attention, especially after the drop in housing starts and a further decline in homebuilder optimism. The supply of new homes coming on the market remains quite strong as demand among speculators and investors is reportedly evaporating. The fallout from a softer housing market is not yet clear, but it potentially has big implications for consumer spending, residential construction, and monetary policy. The Federal Reserve has made it clear that current economic data are playing a much larger role in guiding monetary policy decisions. In particular, the central bank is trying to gauge the potential inflation pressures from improved economic activity. The Beige Book report will provide some anecdotal information for the Fed and investors. The first-quarter employment cost index will also be important. The index has been revamped and some economists expect the new data to show faster growth in wages and salaries. Wall Street will also get a feel for how housing, energy, and other aspects of economic activity are shaping the Fed's next steps when Chairman Ben Bernanke testifies before Congress on Thursday. Indeed, by the time Friday rolls around, the strong GDP results may not cause much of a stir. MEETING OF NOTE Monday, Apr. 24, 12:30 p.m. EDT European Central Bank Executive Board member Jose Manuel González-Páramo gives the keynote address at the Global Financial Imbalances conference in New York City. 1:30 p.m. EDT Brazilian Finance Minister Guido Mantega and Central Bank President speak at the Brazil Summit in New York City. MEETING OF NOTE Tuesday, Apr. 25, 8:50 a.m. EDT Federal Reserve Bank of New York Senior Vice President for Bank Supervision Brian Peters speaks about developments in the credit derivatives market at the Credit Derivatives Congress in New York City. 10 a.m. EDT European Central Bank Presiden Jean-Claude Trichet speaks at the Council of Foreign Relations in New York City. 10 a.m. EDT Securities and Exchange Commission Chairman Christopher Cox testifies on current issues in the U.S. securities markets before the Senate Banking Committee in Washington D.C. ICSC-UBS STORE SALES Tuesday, Apr. 25, 7:45 a.m. EDT
This weekly tracking of retail sales, compiled by the International Council of Shopping Centers and UBS bank, will update buying activity for the period ending Apr. 22. Sales kept at a solid pace in the latest period ended Apr. 15. Compared to a year ago, sales clocked in at a solid pace of 4%. INSTINET REDBOOK RESEARCH STORE SALES Tuesday, Apr. 25, 8:55 a.m. EDT
This weekly measure of retail activity will report on sales for the third fiscal week of April, ended Apr. 22. For the entire month of March, store sales were down 3.2% compared to February. The weekly chain store sales figures in March and April will be affected by the Easter holiday in mid-April this year, after occurring in March last year. EXISTING HOME SALES Tuesday, Apr. 25, 10 a.m. EST
Existing home sales probably tailed off a little after a surprising February increase. Existing home sales have been easing since hitting an annualized pace of 7.27 in June of last year. Most of the decline in sales has been in condominiums, which are more volatile than single-family home sales. February sales of condos in February were down 9.9% from last June while single-family unit sales slipped 4.3%. The softening in the condo market has led to a sharp rise in inventories and a softening in price growth. The supply of condos available is now up to 6.1 months. That's a 45.2% increase from a year ago. Condo prices were up 3.5% from a year ago in February, the slowest pace since November 2000. At the same time, the stock of single-family homes available climbed by 27.5% over the past twelve months and prices were up 11.6%. CONSUMER CONFIDENCE INDEX Tuesday, Apr. 25, 10 a.m. EDT
The Conference Board's April index of consumer confidence probably edged down from its March level as gasoline prices climbed over the period. The March reading was the strongest since May of 2002 and was driven up by increases in the both the current conditions and future expectations indexes. Consumers are feeling a little better about the labor market now and for the next six months. How consumers feel about the labor market and incomes is an important part of the survey. With the housing market slowing down, consumer spending will rely more heavily on wages and job growth. RICHMOND FED SURVEY Tuesday, Apr. 25, 10 a.m. EDT
The Richmond Federal Reserve Bank will release the April survey of business conditions within its district. The region's manufacturers snapped out of a recent funk in March. More respondents said that shipments, new orders, and capacity utilization increased quite a bit. There was also a turnaround in the employment index, rising to 12, from -12 in February. Looking ahead to the next six months, optimism was more subdued. The shipments and new orders indexes plunged by 25 and 26 points, respectively. The capacity utilization index fell to 34, from 51 in February. Even so, all three expectations indexes still stood above the long-term levels. The results point to a deceleration in the growth rate of output and orders. The Richmond Fed survey also asks manufacturers about price trends. In March, the annualized increase in prices received for goods sold to customers slowed to 1.55%, from 2.21% in February. Prices paid also slowed but not as much. The result indicates an additional squeeze on profits. Manufacturers believe the price trend in the next six months will be a little more favorable. MEETING OF NOTE Wednesday, Apr. 26 U.S. Treasury Secretary John Snow speaks during the opening session of the Mortgage Banker's Association's national policy conference in Washington, D.C. 11 a.m. EDT U.S. Department of Commerce Secretary Carlos Gutierrez speaks at the Mortgage Banker's Association's national policy conference in Washington, D.C. MORTGAGE APPLICATIONS Wednesday, Apr. 26, 7 a.m. EDT
The Mortgage Bankers Association releases its numbers on mortgage application volume for both home buying and refinancing for the week ending Apr. 21. The four-week moving average for the purchase index rose for a fourth straight period, to 416.9 in the week ended Apr. 14, due to the weekly jump to 438.2 in late March. The application index is down 12.7% from a year ago. The average rate on a conventional 30-year fixed mortgage turned higher, according to HSH Associates. For the week ended Apr. 14, the rate marched up to 6.62%, from 6.57% for the week ended Apr. 7. The MBA's refi index declined, which caused the four-week moving average to fall as well. For the week ended Apr. 14, the average was 1564.4, down from 1576.5 for the period ended Apr. 7. DURABLE GOODS ORDERS Wednesday, Apr. 26, 8:30 a.m. EST
New orders for durable goods most likely grew at a decent pace. The February surge was dominated by civilian aircraft orders, which soared 52.4%, after a 70.1% plunge in January. Take out the transportation sector and durable goods orders were up 0.8% in February. Analysts will also look at capital goods orders excluding civilian aircraft, a good monthly gauge of business investment. There may be some payback in the recent capital goods orders numbers, off 1.7% in February and unchanged in January, following a 4.9% leap in December. NEW RESIDENTIAL SALES Wednesday, Apr. 26, 10 a.m. EDT
New single-family home sales in March are expected to remain virtually unchanged. The February pace of sales was the slowest since May of 2003. Housing starts are scaling back, down 7.8% in March to an annual pace of 1.96 million. However, the pace of new-home completions has picked up this year. As a result, the months supply of available homes given the current sales pace hit 6.3 months in February, a ten-year high. Prices of new homes were also down 2.9% from a year ago in February. It was the first yearly drop since December of 2003. BEIGE BOOK Wednesday, Apr. 26, 2 p.m. EDT The Federal Reserve will release its compilation of regional economic activity, based on survey responses from each of its 12 districts. The Beige Book comes ahead of the May 10 monetary policy meeting. All the economists queried by Action Economics believe the Fed will hike interest rates by 25 basis points, to 5% at the May meeting. The Apr. 18 release of the Fed's minutes from the March monetary policy meeting appeared to show that the central bank may be close to winding down their march of 25 basis point rate hikes. Investors will peruse the report to get a feel for how the Fed may be viewing economic conditions and, subsequently, to gauge how many more rate hikes may still be coming. MEETING OF NOTE Thursday, Apr. 27, 10 a.m. EDT Federal Reserve Board Chairman Ben S. Bernanke testifies before the Joint Economic Committee of Congress on the U.S. economic outlook in Washington, D.C. JOBLESS CLAIMS Thursday, Apr. 27, 8:30 a.m. EDT
Jobless claims retreated in the week ended Apr. 15 to 303,000. Weekly claims levels near 300,000 are a positive sign for hiring levels. The four-week moving for the period ended Apr. 15 fell for a fourth straight week, to 305,250. Continuing jobless claims for the week ended Apr. 8 edged up to 2.44 million, from 2.42 million in the prior week. HELP-WANTED INDEX Thursday, Apr. 27, 10 a.m. EDT
The Conference Board releases its March index of help-wanted ads, based on ads culled from major newspapers across the nation. The percentage of markets with a rising want-ad volume moderated to 47%, from 53% in January. At the same time, help-wanted ads increased in the three-month period through February in eight of the nine U.S. regions. The biggest gains came in the West South Central and West North Central, which include Texas, Louisiana, Missouri, and Minnesota. The Conference Board's online job ads index rebounded strongly during March. The number of online jobs per 100 persons in the U.S. labor force hit 1.6 in March, from a February level of 1.33, and 1.44 in January. The increase in online job ads rose in all nine regions of the country. MEETING OF NOTE Friday, Apr. 28 Federal Reserve Board Vice Chairman Roger Ferguson to resign. GROSS DOMESTIC PRODUCT Friday, Apr. 28, 8:30 a.m. EDT
The initial look at economic growth for the first quarter of 2006, measured by real gross domestic product, should be the strongest since the third period of 2003. Consumer spending is expected to show a big rebound thanks to a balmy January. The Commerce Dept.'s measure of retail sales posted an annualized jump of 13.4% for the first quarter, vs. a 1.9% rise in the final three months of 2005. A wider trade gap over the first quarter looks probable and would be a drag on first-quarter GDP. The trade gap averaged $67.2 billion over the first two months of the first quarter, after an average deficit of $65.8 billion. Besides the growth figures, investors will take a look at the GDP price indexes. In the fourth quarter, prices across the whole economy rose at an annualized pace of 3.5%. On the consumer level, the personal consumption expenditures price index rose by an annual pace of 2.9% in the fourth quarter, a deceleration from the 3.7% rate in the third quarter. Construction costs shot up, with the price index for residential construction rising at an annual rate of 8.3% and costs in the non-residential sector surging 20.3% in the fourth quarter. EMPLOYMENT COST INDEX Friday, Apr. 28, 8:30 a.m. EDT
The Labor Dept.'s employment cost index, a measure of wages, salaries, and benefits paid by businesses is expected to show an acceleration in labor costs for the first quarter, but there is a large amount of uncertainty. That's because the Labor Dept. will be rolling out an updated version of the index. The industry classifications will switch to the North American Industry Classification System, from the Standard Industrial Classification System. Also, there will be new employment weights and seasonal adjustment factors. The moves mean that the index will no longer be based on a list of industries from 1990. The older list did not include many tech and service sector jobs that only emerged in the 1990s. Some economists expect the change to reveal larger increases in labor costs than currently indicated. In the fourth quarter, wages and salaries picked up a little as the growth in benefits costs slowed further. Compared to a year ago, wages and benefits were up 2.6% after slowing to a yearly clip of 2.3% in the third quarter. The benefits index posted a yearly increase of 4.5% in the final quarter of 2005, down from 5% in the prior period. CONSUMER SENTIMENT INDEX Friday, Apr. 28, 10 a.m. EDT
The University of Michigan's Survey Research Center will report its final reading of consumer sentiment for April. The initial April reading was 89.2. The University of Michigan reported in its final March report that households believe the pace of economic growth would slow in the second half of 2006. Respondents also see the unemployment rate edging higher as well. CHICAGO PURCHASING MANAGERS SURVEY Friday, Apr. 28, 10 a.m. EDT
The Chicago-area purchasing managers' index of industrial activity in the Midwest is forecast to have eased a little in April but remain at an historically healthy level. The March bounce exceeded expectations after cooling down in February and January. The new orders, production, and unfilled orders indexes improved to varying degrees in March. All three indexes also stood above the average level over the past thirty years. More respondents also reported paying more for goods and materials. On the job front, the March report showed that 31% of manufacturers reported an increase in payrolls. That share was 27% in February and just 10% in January. The index level of 55.6% was the strongest since last April. The employment figures are in line with other reports that are displaying solid labor market conditions.
(Footnote: * Median forecast from Action Economics)  By James Mehring Edited by Karyn McCormack Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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