Vital Signs: Softer Forecasts for Fourth-Quarter Growth

(page 3 of 4)

GROSS DOMESTIC PRODUCT - Wednesday, Feb. 28, 8:30 a.m. EDT

The advanced report showed an economy growing at a vigorous pace in the fourth quarter. However, the revised numbers are expected to show a much softer performance. The consensus view among economists surveyed by Action Economics is that the economy only grew by an annualized rate of 2.5%. However, some economists are forecasting a revision down to 2% growth.

The biggest reasons for a downward revision are differences in the Bureau of Economic Analysis' December estimates and the actual results. The December inventory and foreign trade figures did not come in as expected, with actual inventory growth coming in below the BEA assumption and December trade gap exceeding the estimate. The larger-than-expected inventory adjustment at the end of 2006 may clear the way for improved economic growth in the first half of this year.

NEW RESIDENTIAL SALES - Wednesday, Feb. 28, 10 a.m. EST

New single-family home sales most likely held steady in January. In December, purchases bounced up to an annual rate of 1.12 million, from 1.07 million in November. The December result was likely influenced by very mild weather through a large chunk of the country.

During January, mild weather early in the month gave way to below average temperatures and more typical winter weather during the remainder of the period. Both the January and February Housing Market Index readings from the National Association of Home Builders showed improvements in present sales and buyer traffic.

The increase in December sales did pull the down the months supply of homes up for sale, to 5.9 months, from 6.1 months in November. The December level was the smallest since January of 2006. The total number of homes available for sale declined for a fifth straight month, to 537,000. At the same time, the number of completed homes that are yet to be sold continues to stack up. The December level was 172,000. This buildup of finished homes will likely keep some downward pressure on new home prices.

CHICAGO PURCHASING MANAGERS SURVEY - Wednesday, Feb. 28, 10 a.m. EST

The Chicago-area purchasing managers' index of industrial activity very likely moved up to 50%, the inflection point between expansion and contraction of activity. The January reading was 48.8%, down from 51.6% in December. The January result was the first under 50% since the spring of 2003.

The production index climbed to 53.2% in January, from 49.7% in December. However, the new orders, backlog or orders, and employment indexes were all stayed below the important 50% level. In addition, the inventories index slipped to 41.9%, indicating a broadening in the drawdown of stockpiles.

MEETING OF NOTE

Thursday, March 1, 12:45 p.m. EST - U.S. Treasury Secretary Henry Paulson addresses the Economic Club of Washington on the subject of international trade in Washington, D.C.

VEHICLE SALES - Thursday, March 1

Vehicle sales are expected to fall in February. According to WardsAuto.com, sales probably came in at a meager annualized rate of 15.9 million units. That would be the worst monthly performance since June of 2004. Light vehicle sales in both December and January were 16.7 million. Sales in 2006 were the weakest since 1998, when sales stood at 15.5 million.

JOBLESS CLAIMS - Thursday, March 1, 8:30 a.m. EST

Jobless claims jumped in the week ended Feb. 17, to 332,000. In the prior week, claims were revised up to 359,000, from the originally reported 357,000. The four-week moving average climbed to 328,000, from 326,750 in the week ended Feb. 10. Continuing jobless claims for the week ended Feb. 10 cooled to 2.51 million, from 2.55 million in the week ended Feb. 3.

PERSONAL INCOME AND CONSUMER SPENDING- Thursday, March 1, 8:30 a.m. EST

Personal income is expected to have grown at a fairly good clip in January. Overall income growth was 0.5% in December, with a 0.6% jump in wages and salaries. Compared to the same period a year ago, December personal income was up 5.9%, while wages and salaries were 6.4% higher. The solid income gains are helping to sustain consumer spending in the face of a housing recession.

Consumer spending was up 0.7% in December, after a 0.5% gain in November. On a yearly basis, December spending was up 6%, from 5.7% in November. The recent trend in spending may have also gotten a boost from moderating energy prices.

The personal consumption expenditures (PCE) price index, however, did jump 0.4% in December, after holding steady in the previous month. The rise was led by a rebound in energy prices. The nondurable goods price index surged 0.9% in December, after drops in each of the prior three months. The yearly pace of prices also rose, hitting 2.3%, from 1.9% in November, and 1.5% in October. Less food and energy, monthly prices were up just 0.1% in December, and the yearly clip was 2.2%. The core PCE price index is the preferred inflation gauge of the Federal Reserve and the central bank's comfort level for this price index is 1% to 2%.