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Look forward at September 23, 2019 week: 3Q is drawing to a close

A look forward at the September 23 week sees the third quarter 2019 nearing its close. A number of reports will present data for August and September and help shape expectations for GDP in the third quarter, but some will also look back a bit further to close out the second quarter.

The third and final estimate of second quarter GDP is at 8:30 ET on Thursday. At this late date, there is unlikely to be a lot of revision to the 2.0% from the second estimate. Personal consumption remained strong as the quarter progressed while business investment remained largely on hold. Inventory growth was cautious as worries about a possible recession rose with signs of increasingly sluggish economic activity. Net exports were a drag on growth as global demand fell and trade policy led to challenges in costs and the supply chain. In any case, markets are now going to be more focused on conditions in the July-September period and evidence if the present sluggish conditions could sink into outright recession.

The advance report on international trade in goods only, and for retail and wholesale inventories in August at 8:30 ET on Thursday will be among the data that shapes GDP for the third quarter. Further drag from net exports and inventory corrections in response to slower conditions should restrain expectations for growth in the third quarter.

Personal income and spending for August at 8:30 ET on Friday may reflect that workers are not able to command quite the same pace of increase for wages and salaries as some businesses reduce hiring. There is still demand for skilled workers and upward pressure, but not as much.  Personal consumption should continue to be solid. August probably saw good spending on durables and services, while nondurables spending may have declined with falling gasoline prices. The PCE deflator – the FOMC’s preferred measure of inflation – could inch up again. While remaining below the Fed’s 2% objective, it could be another sign that inflation is incrementally moving past some idiosyncratic factors and the fundamentals are reasserting themselves.

The September surveys of regional factory activity for Richmond and Kansas City will be reported at 10:00 ET on Tuesday and 11:00 ET on Thursday, respectively.  Data bout of New York and Philadelphia have already suggested moderation in activity, and the two reports next week are expected to add to that perceptions. The final survey for September will be from the Dallas Fed at 10:30 ET on Monday, September 30.

Regional surveys of the service sector will be released from the Philadelphia and Richmond Feds on Tuesday at 8:30 ET and 10:00 ET, respectively. The New York District survey started off with a decline in activity, although it remained in expansion. Neither the Richmond revenues number or the Philadelphia non-manufacturing index were both on the soft side in August and are not expected to rebound in September. The final service sector survey for September will be from the Dallas Fed at 10:00 ET on Tuesday, October 1.

The Conference Board’s Consumer Confidence Index for September at 10:00 ET on Tuesday may dip from the 135.1 in August which was not much changed from the 135.8 in July. Consumers could be a little less optimistic about present conditions, although the level will be anything but weak. However, the outlook for six months from now may actually improve a bit after a decrease in August. For this particular report, as long as buoyant expectations for present and future labor market conditions remain in place, confidence is not going to do more than fluctuate month-to-month with the news cycle around historically elevated levels.

The final University of Michigan Consumer Sentiment Index for September at 10:00 ET on Friday is not expected to see much revision from the 92.0 in the preliminary report. This survey reflects more of the uncertainty about the economic outlook and that consumers – while definitely expressing solid confidence – are more wary about the future.

A decline in aircraft orders in August will probably bring the total down in the advance report on new orders for durable goods at 8:30 ET on Friday In July, overall durables orders increased 2.0% on aircraft orders, but Boeing reported a decline of 25 orders from the prior month to a total of 6. Without a boost from aircraft, the softness in manufacturing new orders is going to be more evident.

The next piece of housing market data will be the FHFA House Price Index for July at 9:00 ET on Tuesday. It should confirm that price increases for homes have lost momentum, although these continue to gain. In spite of limited supplies, it appears that consumers have more bargaining power with sellers.

Sales of new single-family homes in August at 10:00 ET on Wednesday will show if builders’ optimism about market conditions is warranted. New home sales have picked up in part due to limited stock of existing homes for sale, but also because builders have increased construction of smaller, more affordable units to reach first-time buyers.

The NAR’s Pending Home Sales Index for August at 10:00 ET on Thursday may provide a signal if sales of existing homes will hold up into September. A contract signed is not a sale closed, but is a good indication for the coming month as long as buyers secure financing and home assessments match up with the price.



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