Vital Signs for the Week of Aug. 22


It's another slow summer week for economic data. Among the sprinkling of economic reports coming out, economists will most likely be keeping an eye on those involving housing and energy.

Mortgage rates have rallied in recent weeks. While 30-year fixed rates are still at historically low levels around 6%, the recent gains may be a precursor to a cooler second half for the housing market. Both new and existing home sales are expected to have slowed a little during the hot and steamy month of July.

To be sure, the demise of the housing market has been forecast many times in the past couple years by economists. However, the risks for a slowing housing market heading into 2006 appear to be rising. If the economy remains strong during the second half, then interest rates are likely to keep moving higher as the Federal Reserve ratchets up the fed funds rate.

The turn in expectations for stronger second-half economic growth and the Fed's reiteration that rates will keep on rising led the 10-year Treasury note to bounce back from 3.9% in late June, to over 4.2% currently. While more jobs and rising income are good for housing, interest rates will be the most important factor.

Energy has been another hot market. On Aug. 18, Goldman Sachs said oil prices are likely to stay above $60 per barrel for the foreseeable future, and other market watchers are ratcheting up their oil-price forecasts for 2006. The longer the latest run-up in oil prices lasts, the greater the chance the economy will slip up again as it has done during the second quarters of both 2004 and 2005.

Analysts will be closely monitoring the weekly Energy Information Administration (EIA) report on energy inventories out each Wednesday. Refinery issues led to large declines in inventory levels in the Aug. 17 EIA report. With the hurricane season underway, it will be important to see if inventory levels for oil, gasoline, and heating oil can remain at adequate levels.

Here's the weekly economic calendar.

ICSC-UBS STORE SALES

Tuesday, Aug. 23, 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 Aug. 20. During the week ended Aug. 13, sales fell 0.2%, following a 0.8% decline in the week ended Aug. 6.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, Aug. 23, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales for the third fiscal week of August, ended Aug. 20. During the first two fiscal weeks of the month, sales were off 0.9% compared to the same period in July. For the entire month of July, sales were up 0.3%.

EXISTING HOME SALES

Tuesday, Aug. 23, 10 a.m. EDT

Sales of existing homes, which includes single-family homes and condominiums, most likely slowed a little. The consensus among economists surveyed by Action Economics is for an annual rate of 7.25 million during July. The National Association of Realtors reported June sales reached an annual pace of 7.33 million, after easing to a rate of 7.14 million in May.

RICHMOND FED SURVEY

Tuesday, Aug. 23, 10 a.m. EDT

The Richmond Federal Reserve Bank will release the August survey of business conditions in the Richmond Fed district. The region's manufacturers showed scant signs of improved confidence in July.

The headline shipments index held at -3 in July, after slipping to -3 in June, from 4 in May. The new orders index did improve to -3, after tumbling to -7, from 5 in both May and April. Nonetheless, the July new orders index did show that more respondents than not saw orders decline. Manufacturers also trimmed payrolls for a fifth straight month according to the survey.

The outlook for the coming months retreated in July, to 17. In June, the index bounced up to 22, from 17 in May. There was a small improvement in the new orders index for the next six months, while the unfilled orders index edged up to 10, from 9 in June.

As far as pricing power and input costs are concerned, manufacturers see little change in the recent trend. Price hikes for the goods manufacturers produce are expected to remain smaller than changes in input costs.

MEETING OF NOTE

Wednesday, Aug. 24, 6 p.m. EDT

Federal Reserve Bank of Chicago President Michael Moskow speaks about the U.S. economy at a business and technology conference in Rosemont, Illinois.

EARNINGS REPORTS

Wednesday, Aug. 24

Brown-Forman Corp., Intuit, and more.

MORTGAGE APPLICATIONS

Wednesday, Aug. 24, 7 a.m. EDT

The Mortgage Bankers Assn. releases its numbers on mortgage applications for both home buying and refinancing for the week ending Aug. 19. The purchase index increased to 499.3 during the week ended Aug. 12, after rising to 498.8 in the prior period from 494.5 over the week ended July 29. The four-week moving average did post an increase to 494.4, from 491.8 for the week ended Aug. 5.

The average rate on a conventional 30-year fixed mortgage, according to HSH Associates, climbed to 6.06% during the week ended Aug. 12. For the week ended Aug. 5 the mortgage rate stood at 6%.

The MBA's refi index bounced back. In the period ended Aug. 12, the index came in at 2285.5, from 2176.5 in the week ended Aug. 5. The four-week moving average kept falling. In the week ended Aug. 12, the average stood at 2335.5, down from 2341.3 for the period ended Aug. 5. The moving average has fallen for four straight weeks.

DURABLE GOODS ORDERS

Wednesday, Aug. 24, 8:30 a.m. EDT

Orders for durable goods coming into factories probably fell in July. According to Action Economics, orders are expected to decline by 1.4%. The Census Bureau issued revised benchmark data on Aug. 19 going back to 2002. The expected July drop would come on the heels of a 2.8% increase in June (revised from 1.4%) and a 7.3% surge in May (revised from 6.4%). Overall May orders took off due to strong civilian aircraft bookings. However, the June increase, while smaller, reflected broader gains. The most encouraging turnarounds came in computers and machinery.

After two strong months and the typical monthly volatility in new orders, the forecasted dip for the overall July total should not be viewed too negatively.

Another measure for business spending is durable goods orders less defense equipment and aircraft categories. In June, this core measure of capital goods orders measure rebounded with a 7.1% jump (revised sharly higher from 3.8%), after a fall of 0.5% in May, and a 0.8% gain in April.

NEW RESIDENTIAL SALES

Wednesday, Aug. 24, 10 a.m. EDT

New single-family homes sales are expected to have slowed a little in July. The consensus among economists queried by Action Economics is for sales to stand at an annual pace of 1.3 million. In June, sales rose to an annual pace of 1.37 million, from 1.32 million in May. If mortgage rates continue their upward trend of late, sales should begin to slowly ease during the final four months of the year. Even so, 2005 should end up being another record year for home sales.

EARNINGS REPORTS

Wednesday, Aug. 24

Dollar General, Toll Brothers, and more.

JOBLESS CLAIMS

Thursday, Aug. 25, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended Aug. 20 probably dipped to 315,000, close to the 316,000 reading for Aug. 13. Jobless claims came in at 316,000 for the week ended Aug. 13, and stood at an upwardly revised 310,000 for the week ended Aug. 6.

The four-week moving average edged up to 312,800, from 310,000 for the period ended Aug. 6. Continuing jobless claims for the week ended Aug. 6 ticked up to 2.59 million, from 2.57 million in the previous week.

HELP WANTED ADS

Thursday, Aug. 25, 10 a.m. EDT

The Conference Board releases its July index of help-wanted ads, based on ads gathered from major newspapers across the nation. The national index edged back up to 38 in June, after dropping to 37 in May, from 39 in both April and March. A year ago, the July index was 37.

The percentage of markets with a rising want-ad volume improved to 47%, from 41% in May, and 35% in April. The upward trend is encouraging and fits with other jobs data. At the same time, help-wanted advertising shrank in seven of the nine U.S. regions in the three-month period through June.

The issue with this report is the migration of job postings to the Internet. With more employers putting job openings on their web sites and Internet job sites, such as Monster.com, the accuracy of traditional help-wanted listings in gauging the labor market may be waning.

MEETING OF NOTE

Friday, Aug. 26

Federal Reserve Board Chairman Alan Greenspan speaks about central banking at the Federal Reserve Bank of Kansas City's annual conference in Jackson Hole, Wyoming.

CONSUMER SENTIMENT INDEX

Friday, Aug. 26, 10 a.m. EDT

The University of Michigan's Survey Research Center will report its final reading of consumer sentiment for August. The median estimate from Action Economics is a reading of 92.7, unchanged from the preliminary August result. The final July reading was 96.5, after climbing to 96 in June, from 86.9 in May.

According to the University of Michigan, consumers expected slower economic growth as a result of higher gasoline prices. Even so, consumers felt better about their financial situation. By James Mehring


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