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Look forward to June 17, 2019 week: FOMC expected to remain patient; housing market could shine

A look forward at the June 17 week puts the Tuesday-Wednesday front and center ahead of the economic data. The release of the statement and Summary of Economic Projections (SEP) materials at 14:00 ET on Wednesday will probably tell markets all they need to know about expectations for a rate cut. Anticipation of a cut at the next meeting on July 30-31 is high, but it is doubtful that the FOMC is going to elevate these by a significantly more dovish statement or by downgrades in the SEP that would do much more than take off the table the one upward move implied in the March SEP.

Chair Jerome Powell’s press briefing at 14:30 ET on Wednesday will probably be narrowly focused on getting him to break with the cautious language of recent weeks and say something that would confirm that the FOMC is indeed preparing to give markets the “insurance” rate cut they are clearly craving. Powell himself would probably prefer to discuss some detail from recent “Fed Listens” sessions about updating the framework for monetary policy.

Among the week’s data reports, those associated with the housing market are likely to be the standouts.

On Monday at 10:00 ET, the NAHB Housing Market Index for June might just manage to rise from the 66 in May and touch on the strong readings of a year ago. Builders should see higher optimism about present and future sales of single-family homes as buyers are more plentiful in line with lower mortgage rates. Narrow supplies of new construction and milder weather should boost starts of new homes and increase demand for building permits in the May data at 8:30 ET on Tuesday. Construction may face the long-standing constraints of lack of skilled workers and land for building, but the lack of housing stock of existing units will motivate builders.

NAR data on sales of existing homes in May will be reported at 10:00 ET on Friday. Home resales are anticipated to pick up again in May after slightly softer readings in March and April that followed on a surge of purchases in February when pent-up demand was exercised. Competition for available units should keep prices moving higher and eat into the modestly higher inventories in the prior month or two.

The earliest reports on manufacturing activity in June will be the New York Fed’s Empire State Survey at 8:30 ET on Monday and the Philadelphia Fed’s Manufacturing Business Outlook at 8:30 ET on Thursday. Both Districts report improved activity in May from April. While the pace of the respective general business condition indexes isn’t going to return to the heights of 2018, it should be consistent with at least middling expansion. The New York and Philadelphia measures are not the best flags for activity in the overall factory sector.

The New York Fed’s Business Leaders Survey for June at 8:30 ET on Tuesday will be the first among the regional surveys for the service sector. Last month saw a sharp rise in the index to 20.6 in May from 10.9 in April. I would expect some of that to fade to what appears to be the underlying trend of modest activity.

Initial jobless claims for the week ended June 15 at 8:30 ET on Thursday shouldn’t be much changed from the 222,000 in the prior week. The present trend level seems to be running between about 215,000-225,000. The end of the school year has seen layoffs in education adjacent services. Many of these workers should be able to pick up new jobs fairly quickly.

The Conference Board’s Leading Economic Index for May at 10:00 ET on Thursday should reflect continued expansion with solid confidence, higher stock valuations, and building permits.  However, new orders have not been particularly strong for manufacturing.


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