The partial federal government shutdown that went into effect December 22 is ongoing. At present economic data out of the Bureau of Labor Statistics and Federal Reserve are unaffected, but numbers from the Census Bureau are on hiatus. Reports that have been delayed so far are:
- Sales of new single-family homes for November (was Thursday, December 27 at 10:00 ET)
- Advance international trade, retail inventories, wholesale inventories for November (was Friday, December 28 at 8:30 ET)
- Construction spending for November (was Thursday, January 3 at 10:00 ET)
- Factory orders for November (was 10:00 ET on Monday, January 7)
- International trade in goods and services for November (was 8:30 ET on Tuesday, January 8)
- Wholesale trade for November (was 10:00 ET on Thursday, January 10)
- Retail and food sales for December (was 8:30 ET on Wednesday, January 16)
- Business inventories for November (was 10:00 ET on Wednesday, January 16)
- Housing starts and building permits issued for December (was 8:30 ET on Thursday, January 17)
The backlog of reports is growing and including more critical reports like those for retail and housing. The casualties of the shutdown next week are:
- Advance report on orders for durable goods in December (was 8:30 ET on Friday, January 25)
- Sales of new single-family homes in December (was 10:00 ET on Friday, January 25)
The communications blackout period around the January 29-30 FOMC meeting will go into effect as of midnight on Saturday, January 19 and last through midnight on Thursday, January 31. Fed policymakers will be out of the public eye and ear during that period, at least in regard to monetary policy and the economic outlook with the exclusion of the Chair’s press briefing on Wednesday, January 30 at 14:30 ET. A lack of visibility in Fed officials before a meeting is routine but given the absence of important economic data and a disruptive political showdown, markets could miss reassurances regarding the outlook.
The January 21 week starts off with a federal holiday on Monday to observe M.L King, Jr. Day. It is a full market close for the bond and stock markets. The rest of the week has a light data schedule.
The NAR will release numbers on sales of existing homes in December at 10:00 ET on Tuesday. It is possible the level of sales will end 2019 on a slightly improved note and rise for a third month in a row. Fence-sitters may have looked at the dip in mortgage interest rates to 4.64% in December from the near-term peak of 4.87% November and decided to act before the Fed raised rates again. Existing homes account for about 4/5 of homes sold, so the lack of new home sales data later in the week will not leave too big a hole in the housing market picture.
One of the oft-cited minuses for the housing market has been the upward movement in prices in addition to mortgage rates. The FHFA House Price Index for November at 9:00 ET on Wednesday lags the sales numbers by one month, but it is expected to show a continued upward movement in prices, if at a slower pace than in the past two or three years. The S&P CoreLogic Case-Shiller House Price Index for November will not be available until Tuesday, January 29 at 9:00 ET.
The Conference Board’s Leading Economic Index for December at 10:00 ET on Thursday, January 24 will have to have some of its components estimated – those for building permits and manufacturers’ new orders. It will also be the time for the index’s annual benchmark revisions. The index isn’t generally a market-mover, so taking a little time to sort out the implications should not be a problem.
Will initial jobless claims encounter some noise in the January 19 week when the data is reported at 8:30 ET on Thursday? If there was going to be a wave of layoffs after the holiday period for the retail and transportation sectors, the seasonal factors anticipated it in the prior two weeks, although the January 19 factor is still substantial. The partial federal shutdown introduces a wild card. Furloughed federal workers can apply for claims, although the claim may be denied if the applicant is technically still employed. Workers dependent on federal contracts are paid by their employers. Unless their employers lay them off – however temporarily – they will not appear as unemployed. So far government contractors appear to be holding on to workers. How long this will last without contract payments is in question. Most will not want to lose their experienced workforce, especially if workers seem inclined to seek other employment in a tight labor market.
The next January District Bank reports for the factory sector are the Richmond Fed’s Survey of Manufacturing Activity at 10:00 ET on Wednesday and the Kansas City Fed’s Manufacturing Survey at 11:00 ET on Thursday. Of the two, it will be most interesting to see if the Richmond Fed Manufacturing Composite Index returns to expansion territory after plunging to -8 in December from 14 in November. The Kansas City Manufacturing Index also fell sharply in December to 3 from 15 in the prior month. The reports from the New York and Philadelphia Fed’s point to still expansionary conditions for the factory sector. However, it would appear that the hectic pace of growth in 2018 has faded to something more modest and perhaps more sustainable.
While conditions in the factory sector appear to have steadied after an abrupt slowing in December, the service sector may not be faring as well. The government shutdown has probably cut into activity for a variety of services contracted out by the federal government which are deemed non-essential. Non-payment of existing contracts and an inability to close contracts under negotiation have hurt activity. The Richmond Fed’s Survey of Service Sector Activity for January at 10:00 ET on Wednesday may provide the second piece of evidence that 2019 has been hampered at the start. The New York Fed’s Business Leaders Survey for January put current activity at 0.0 (zero), and down for a fourth month in a row.
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