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Look forward at April 22, 2019 week: Advance estimate of first quarter GDP comes as second quarter data mounts an improvement

The April 22 week will provide data that should show if the housing market recovered a bit from the sluggishness in the second half of 2018. March numbers for existing home sales (Monday at 10:00 ET) and new single-family home sales (Tuesday at 10:00) may benefit from falling mortgage interest rates that has helped renew the impetus to buy a home. At the same time supplies of the more sought-after units in the middle price range are limited. Limited supplies are driving some buyers to opt for purchasing new construction rather than face the frustrations of competing for existing units.

Also affecting home buying is the direction of home prices. The FHFA House Price Index for February (Tuesday at 9:00) will lag the price data in the home sales numbers by one month, but it should confirm that outside of month-to-month wiggles, trends for prices remain on a moderate upward trajectory.

When Freddie Mac reports mortgage rates for the week of April 25 (Thursday, approximately 10:00 ET), it is expected that the level will remain low in the historical context. However, it is possible that the recent small upward ticks in fixed rates will continue. If so, it may provide some incentive to potential homebuyers to enter the market now before they start to climb again.

Fed District Bank surveys of manufacturing for April will be from the Richmond Fed (Tuesday at 10:00 ET) and Kansas City Fed (Thursday at 11:00 ET).  So far, the New York and Philadelphia surveys have presented a mixed picture, but on the whole it would appear that the volatility that marked the final months of 2018 and the start of 2019 has settled out. Underlying conditions seem to be for a pace of middling expansion. It may be disappointing relative to the more heated environment in much of 2017 and 2018, but activity is still modest-to-moderate.

The District Bank surveys for the service sector for April will be the Philadelphia Fed’s Non-Manufacturing Index (Tuesday at 8:30 ET) and the Richmond Fed’s Survey of Service Sector Activity (Tuesday at 10:00 ET). Services are harder to measure and compare across regions. The sector was particularly affected by the partial federal government shutdown as existing contracts were not paid in January and into February, and new contracts could not be finalized in January and well into February and even March. However, the New York Fed’s Business Leaders Survey points to activity evening out in April for modest expansion. This is likely to be true for the other regions as well.

With data available for the start of the second quarter and the first quarter numbers by-and-large reported, the advance estimate of first quarter GDP (Friday at 8:30 ET) should not hold too many surprises. That said, the first quarter is notorious for exhibiting “residual seasonality” that tends to depress the headline. A soft number could excite calls for the Fed to pare back some of the recent interest rate increases. However, with the FOMC already firmly in “wait-and-see” mode, and policymakers’ recent comments emphasizing both the patience and data-dependence of the monetary policy process, these will be futile.  There is sufficient evidence that the US economy has not slowed to the point where monetary stimulus is necessary that it would take an exceptionally dire report in isolation to prompt action.

One vital aspect of the economy that the FOMC will be able to cite as fundamentally healthy is the tight labor market. Weekly initial jobless claims have been below the 200,000-mark for two weeks and at nearly 50-year lows. The numbers for the April 20 week (Thursday at 8:30 ET) probably won’t be quite that spectacular. The seasonal adjustment factors anticipate a low number of claims for the week and may present a mismatch on the actual unadjusted level. I will also note that the presence of the Passover/Easter weekend is relatively late this year and may play a part in introducing some volatility in the short-term.

New orders for durable goods in March (Thursday at 8:30 ET) will be coming off two slow months.  New orders were down 1.6%in February, although that was driven by the transportation component falling 4.5% on fewer orders for nondefense aircraft. Boeing reported an increase of 39 to a total of 44 new orders in March, so that may reverse in the coming report.

The final University of Michigan Consumer Sentiment Index for April (Friday at 10:00 ET) could see some upward revision from the preliminary 96.9. It is unlikely that the preliminary reading for current conditions will change much from the 114.2 as consumers are already quite optimistic, but the six-month expectations may manage to improve from the initial reading of 85.8. Still, while consumers’ perceptions of conditions remain quite solid overall, these are less giddy than in the prior two years and more uneven.

Fed policymakers will be out of the public eye and ear during the communications blackout period around the April 30-May 1 FOMC meeting. Except for the Chairs press briefing (Wednesday, May 1 at 14:30 ET), Fed officials will avoid commenting on monetary policy until after midnight on Thursday, May 2.

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