A look forward at the November 18 week presents a light economic data calendar with the release of the minutes of the October 29-30 FOMC meeting minutes in the middle at 14:00 ET on Wednesday.
The minutes will be heavily scrutinized for clues as to the outlook for interest rate policy. However, the usual caveat applies in that the discussions are now three weeks old and took place before a number of critical pieces of data came available. Also, once the communications blackout period was over on October 31, Fed policymakers have been generous with public comment. And finally, Chair Jerome Powell has made a number of appearances since then and not altered the views he expressed at the post-meeting press briefing.
The upshot is that the minutes are not going do much to advance perceptions of how Fed policymakers are positioned going into the December 10-11 meeting. Absent an exogenous event to alters the risks to the economy – in either direction – interest rate policy is probably on hold for a while yet. The gap in views among FOMC participants is still wide but seems to have narrowed a bit at the October meeting. If the data continues as it has with a resilient labor market and inflation starting to nudge toward the 2% objective, another rate cut at the December meeting is unlikely to be deemed “appropriate”.
The real importance of the minutes may ultimately be in the discussion of the policy framework review and the balance sheet. I note that there was no formal update of the Summary of Economic Projections (SEP) at the October meeting; that will wait for December.
The coming week is the last in which there will be a significant opportunity for comment on monetary policy from policymakers. Although the communications blackout period for the next meeting doesn’t start until midnight on November 30, the November 18 week is the last full business week before the Thanksgiving holiday. The November 25 week will effectively be only three business days long.
In the current week, the big economic data will pertain to the housing market. In recent months housing has responded to low mortgage rates and the ongoing health of the labor market with consumers cautiously making purchases. Limited supplies of existing homes in hot markets have driven some to opt for new construction to the benefit of overall home sales.
The NAHB/Wells Fargo Housing Market Index for November at 10:00 ET on Monday is expected to remain close to the 71 of October when it reached its highest since 71 in February 2018. Homebuilding typically cools somewhat along with the weather in the fall, but this year demand may keep construction activity going a bit longer than usual. Starts of new homes in October at 8:30 ET on Tuesday may reflect some vagaries of the weather and/or wildfires in the West. However, permits issued in recent months could blunt the impact of some regional challengers. New permits in October should remain on track for solid levels.
Sales of existing homes for October at 10:00 ET on Thursday could stage a modest rebound after falling to 5.38 million units (SAAR) in September. Pending home sales data for September pointed to plenty of fresh contracts signed that should go to closing in October. Consumers are anxious to lock in low mortgage rates, although they are also negotiating price aggressively.
The final University of Michigan Consumer Sentiment Index for November at 10:00 ET on Friday should remain little revised from the 95.7 in the preliminary report which was in turn little changed from the 95.5 of October. Consumers are still optimistic about jobs and income, if somewhat less than last year and earlier in 2019. They also seem to be getting inured to the noisy and ugly political news cycle. It has reduced confidence in the near future but not enough to erase a positive outlook.
Activity in manufacturing in November will get an update with fresh data from two regional surveys. The Philadelphia Fed’s Manufacturing Business Outlook Survey at 8:30 ET on Thursday and the Kansas City Fed’s Manufacturing Survey at 11:00 ET on Friday will add to the New York Fed’s Empire State Manufacturing Survey that was released on November 15. The Philadelphia general business conditions index could moderate further from the 5.6 in October. The Kansas City index will probably hold somewhere near the -3 of October. Manufacturing tends to slack off in the winter months so it may be hard to discern what is normal seasonal easing and what is related to ongoing trade disputes and slower global growth.
The Conference Board’s Leading Economic Index for October may not improve after the mild negatives of the prior two months. New orders have generally been weak and consumers wary about the future. Treasury yields were still narrow in October although they have since widened. Jobless claims were up a bit in October relative to September. Permits issued were down again in September and should rebound in October. Hours worked were not much changed.
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