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|  | MAY 20, 2005
Vital Signs for the Week of May 23On tap: April personal income and spending data, first-quarter gross domestic product revisions, new and existing home sales for April, and moreFears of an economic slowdown appear to have been a little overblown. Oil and gasoline prices that zoomed higher through the first quarter and slower economic growth abroad appear to have had just a small negative impact on the U.S. economy. Despite the dizzying level of energy prices, the economy is now believed to have expanded at an annualized rate of 3.6% during the first quarter. With oil now back below $50 per barrel and U.S. petroleum product inventories at healthy levels, the trade deficit could be less of a drag on second-quarter growth. At home, personal income is growing at a healthy clip which in turn is fueling consumer spending. Despite some pullback in incentives from major U.S. auto makers, April light vehicle sales improved quite a bit. Weekly retail sales figures have also remained generally positive. The comprehensive consumer spending numbers out on May 27 are expected to affirm the positive trend. What's more, mortgage rates lingering below 6% are keeping the housing market red hot. The May housing market index rebounded on reports of greater sales. Those results should be confirmed by the April home sales figures. And as long as housing stays strong, it will help fuel purchases of big-ticket home items such as appliances and furniture. Manufacturing has been one area of concern lately. Recent regional factory activity indexes have tumbled and factory orders have been soft. However, the Federal Reserve's April industrial production report was stronger than the headline numbers suggested, with autos keeping overall factory output flat. Take out autos and manufacturing output was up 0.4%. Machinery and computer output each rose over 1% in April. Now April durable goods orders figures are expected to show that factories will remain busy. Add it all up, and second-quarter growth could end up close to an annualized pace of 4%. That's a far cry from a soft patch. Here's the weekly economic calendar. MEETING OF NOTE Monday, May 23, 9:30 a.m. EDT Federal Reserve Bank of Philadelphia President Anthony Santomero speaks about current economic trends at the Second National Summit on Equitable Development, Social Justice, and Smart Growth in Philadelphia. EARNINGS REPORTS Campbell Soup, and more. MEETING OF NOTE Tuesday, May 24, 7 p.m. EDT Federal Reserve Bank of Chicago President Michael Moskow takes part in a discussion on community trust at the Chicago Fed's MoneySmart conference in Chicago. EARNINGS REPORTS Computer Sciences, Medtronic, Network Appliance, and more. ICSC-UBS STORE SALES Tuesday, May 24, 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 week ending May 21. In the week ended May 14, sales retreated by 1%, after a 0.7% gain in the prior period, and a 0.5% increase in the week ended Apr. 30. INSTINET REDBOOK RESEARCH STORE SALES Tuesday, May 24, 8:55 a.m. EDT This weekly measure of retail activity will report on sales for the third fiscal week of May, ended May 21. For the first two fiscal weeks of May, sales were up 2.5% vs. the same period in April. For the full month of April, sales were off by 3.9% compared with the full month of March. EXISTING HOME SALES Tuesday, May 24, 10 a.m. EDT April sales of existing homes, which includes single-family homes and condominiums, are expected to hold steady. The consensus among economists surveyed by Action Economics is for an annual rate of 6.9 million. In March, sales climbed to a pace of 6.89 million, from an annual rate of 6.82 million in both February and January. Back in February, historical revisions were made back to 1989. The new totals were the result of implementing a new methodology. Condominium sales were also added to the sales figures. Overall, the new historical figures were lower than originally reported, but the strong trend remained intact. RICHMOND FED SURVEY Tuesday, May 24, 10 a.m. EDT The Richmond Federal Reserve Bank will release its May survey of business conditions in the Richmond Fed district. The April survey showed that manufacturers were doing a little better. They also were optimistic about the coming six months. However, sharp downturns in the May Philly and New York Fed regional factory activity surveys present some downside risk to the Richmond report. The headline index edged up to 2, from a reading of 0 in March, but remained below the February result of 4. The shipments and new orders indexes were higher, while the backlogged orders index improved to -3, from -20 in March, and -4 in February. The backlogged orders index has been in negative territory for 11 of the past 12 months. A negative figure indicates that unfilled orders are declining. Over the coming six months, the shipments index stood at 23, from 33 in March, and 32 in February. New orders, as well as backlogged orders indexes were steady. The outlook for the coming months remains fairly positive but most components are now running below their long-term averages. FOMC MINUTES Tuesday, May 24, 2 p.m. EDT The Federal Reserve will release the minutes of the Open Market Committee meeting held on May 3. As of this year, the Fed is now releasing the minutes three weeks after its monetary policy meeting. Prior to the change, minutes were released with a six- to eight-week lag. The Fed's post-meeting press release showed a change in the central bank's inflation assessment by stating, "Pressures on inflation have picked up in recent months and pricing power is more evident." Fed watchers will peruse the latest minutes for any signs that the central bank may veer from its methodical pace of tightening. MEETING OF NOTE Wednesday, May 25, 12:30 p.m. EDT Federal Reserve Bank of Atlanta President Jack Guynn speaks about the U.S. economic outlook at a Certified Professional Home Builder luncheon in Atlanta, Georgia. EARNINGS REPORTS AutoZone, Brown-Forman Corporation, Novell, and more. MORTGAGE APPLICATIONS Wednesday, May 25, 7 a.m. EDT The Mortgage Bankers Association releases its tally of mortgage applications for both home buying and refinancing for the week ending May 20. For the week ended May 13, the purchase index retreated to 469.3, after reaching a record high of 526.2 in the previous week, from 482.5 in the week ended Apr. 29. The four-week moving average rose to 490, from 489.4 for the week ended May 6. The average rate on a conventional 30-year mortgage, according to HSH Associates, fell a little more. In the week ended May 13, the rate was virtually unchanged at 5.9%, after slipping to 5.89% in the previous week. The MBA's refi index also declined. In the period of May 13, the index stood at 2036.7, from 2263.3 for the week ended May 6 and 2061.2 during the week ended Apr. 29. The four-week moving average managed to increase to 2103.4, from 2061.8 in the week ended May 6. DURABLE GOODS ORDERS Wednesday, May 25, 8:30 a.m. EDT Orders for durable goods coming into factories probably rebounded after showing some weakness in the prior two months. According to Action Economics, economists expect April orders to have increased by 1%. In March, orders plunged by 2.3%, after a 0.1% dip in February, and a 1.2% decline in January. Core nondefense capital goods orders, which strips out the large ups and downs in aircraft bookings, has also weakened. The core number provides a better look at the underlying strength of business sentiment. In March, orders dropped by 4%, following a 2.1% fall in February, and a 4.4% surge in January. Areas of weakness included electrical equipment and home appliances, along with construction and industrial machinery. Part of the recent softness may be due to higher oil prices in March as well as some payback from the expiration of the bonus depreciation law at the start of the year. NEW RESIDENTIAL SALES Wednesday, May 25, 10 a.m. EDT New single-family homes sales probably came back down from a record March result. The consensus among economists surveyed by Action Economics is for sales to stand at an annual pace of 1.351 million. In March, sales stood at an historically high rate of 1.43 million, from 1.28 million in February, and 1.18 million in January. The Federal Reserve has so far shown scant signs of altering its strategy of quarter-point rate hikes at each monetary policy meeting. As a result, some households are trying to purchase a house now in order to lock in a lower mortgage rate. Indeed, mortgage applications as measured by the Mortgage Bankers Association hit a record high during the first week of May. In addition, the labor market and wages are gradually improving. The strengthening labor market should help partially offset the drag from higher interest rates. MEETINGS OF NOTE Thursday, May 26, 8 a.m. EDT Federal Reserve Bank of Atlanta President Jack Guynn discusses the U.S. economic outlook and monetary policy before the Georgia Society of Certified Public Accountants in Atlanta, Georgia. 1 p.m. EDT Federal Reserve Bank of Chicago President Michael Moskow gives a luncheon speech at the annual conference of the National Academy of Arbitrators in Chicago. EARNINGS REPORTS Computer Associates International, Costco, Dollar General, H.J. Heinz, and more. JOBLESS CLAIMS Thursday, May 26, 8:30 a.m. EDT First-time claims for jobless benefits for the week ended May 21 probably stood at 325,000. Jobless claims dropped back to 321,000 for the week of May 14, after rising to 341,000 in the prior period, from 336,000 in the week of May 7. The four-week moving average rose to 329,800, from 324,300 during the prior week, and 322,000 in the week ended Apr. 30. In the week ended May 7, continuing jobless claims held at 2.6 million for a second straight period. GROSS DOMESTIC PRODUCT Thursday, May 26, 8:30 a.m. EDT The preliminary report on economic growth for the first quarter of 2005, measured by real gross domestic product, is expected to show the economy expanded by a seasonally adjusted annual rate of 3.7%. That's the consensus among economists queried by Action Economics. The initial report on first-quarter growth showed a disappointing annualized pace of 3.1%. The smaller-than-expected increase was due in large part to a reversal in business outlays for transportation equipment. However, forecasts by the Bureau of Economic Analysis for March trade and inventory data -- figures that are released subsequent to the initial report -- were probably off a bit. The March goods deficit of $59.4 billion was certainly smaller than the BEA forecast and should mean a positive revision to growth. In the fourth quarter, the economy expanded at a seasonally adjusted annual rate of 3.8%, after a 4% increase in the third quarter, and a 3.3% "soft patch" of growth in the second period of 2004. HELP WANTED ADS Thursday, May 26, 10 a.m. EDT The Conference Board releases its April index of help-wanted ads, based on ads gathered from major newspapers across the nation. The March results showed a reversal in the recent optimistic trend. The index stood at 39 after readings of 41 in both February and January. In April of 2004, the index stood at 38. The percentage of markets with a rising want-ad volume plummeted to 10%, from 53% in February, 69% in January, and 71% in December. Overall help-wanted advertising volume grew in only three of nine U.S. regions during the three-month period through March. The latest figures may be an indication that employers took a wait-and-see approach in March when energy prices were high and another economic soft patch became the popular view. However, the April labor report provides some hope that the April help-wanted results will bounce back. MEETING OF NOTE Friday, May 27, 3:10 a.m. EDT Federal Reserve Bank of San Francisco President Janet Yellen takes part in a panel discussion at a Bank of Korea conference on stabilization policies in Seoul, South Korea. PERSONAL INCOME AND CONSUMER SPENDING Friday, May 27, 8:30 a.m. EDT Personal income is expected to grow at a solid clip. The consensus among economists surveyed by Action Economics is for a 0.7% improvement for the month of April. In March, income rose 0.5%, after a 0.4% gain in February. Compared with a year ago, income was up by 6.0% in March, and would edge up by 6.1% in April if the median estimate proves correct. Outlays on goods and services most likely posted a monthly increase of 0.8%. Better-than-expected vehicle sales in April should account for a sizeable share of the improvement. In March, consumption rose 0.6%, after a February rise of 0.7%. The yearly growth rate of consumer spending picked up to 6.1% in March, from 5.9% in both February and January. Using the forecasted increase for April, spending would be up 6.8% from a year ago. The price index for personal consumption expenditures (PCE) may be the most heavily scrutinized data in the whole report this time around. In March the price index rose to 2.4% above the year-ago level, after holding at 2.2% in both February and January, but remaining below the 2.5% yearly pace back in December. The Federal Reserve's preferred inflation gauge is the PCE price index excluding food and energy. In March, that core inflation measure was 1.7% above the year ago level after annual increases of 1.6% in both February and January. Economists will look extra hard at these inflation numbers since they are preferred by Fed Chairman Alan Greenspan. CONSUMER SENTIMENT INDEX Friday, May 27, 10 a.m. EDT The University of Michigan's Survey Research Center will report its final reading of consumer sentiment for May. The median estimate from Action Economics is a reading of 86. That would be slightly better than the 85.3 result of the initial May survey. The final April reading was 87.7, down from 92.6 in March, and 94.1 in February. In the early look at consumer sentiment for May, both the current conditions and future expectations components took a step back. The current conditions index eased to 103.3, from 104.4, while the future expectations index fell to 73.7, from a final April reading of 77. The erosion of consumer confidence is linked to rising inflation expectations and the shaky stock market. The University of Michigan's measure of sentiment has traditionally been more sensitive to the financial markets than the Conference Board's consumer confidence survey.  By James Mehring
BW MALL
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