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Look forward to December 16, 2019 week: Economic data will be read and quickly digested as the holiday approaches

A look forward at 16 week presents the last significant schedule of economic data releases before the holidays begin in earnest. It is a packed calendar to get the numbers out before many in government and the private sector take an extended break until the New Year.

The first wave of regional surveys for manufacturing activity in December will be the New York Fed’s Empire State Survey at 8:30 ET on Monday, the Philadelphia Fed’s Business Outlook at 8:30 ET on Thursday, and the Kansas City Fed’s Manufacturing Survey at 11:00 ET on Friday. I wouldn’t look for any improvement in conditions quite yet. December is often the start of a deceleration of activity in the winter months and some severe weather in the Northeast may contribute to softer numbers for New York especially, and Philadelphia to a lesser extent. Both these regions have managed to hold on to narrow expansion in recent months, but that may not be the case this time around. Kansas City seems settled into a narrow contraction as its manufacturers struggle with not enough qualified workers and uncertainty in trade policy.

The numbers for industrial production and capacity utilization at 9:15 ET on Tuesday are likely to rebound after the decline in October. GM production will be back on line and utilities output is going to be up as cold weather closed in. Mining may decrease due to less extraction of oil and natural gas.

The only regional survey for the service sector to be released is the New York Fed’s Business Leaders Survey at 8:30 ET on Tuesday.  For the District, activity seems to be muddling along at a low level.

Data for the housing sector will start off with the December NAHB/Wells Fargo Housing Market Index for December at 10:00 ET on Monday. I would anticipate another tick down from the 70 reading in November. Low mortgage rates are going to keep activity unusually brisk for this time of year, but demand is likely to be off after recent months’ busyness.

Starts of new homes in November may have suffered with the arrival of a period of deep cold and early winter storms that swept over large parts of the US. The data at 8:30 ET on Tuesday may well disappoint, but consumers’ appetite for new construction means it is likely to rebound in December. Permits for homes in November should drop from the near-term peak of 1.416 million units (SAAR) in October, but that should not belie the underlying solid trend for permits.

The NAR data for sales of existing homes in November at 10:00 ET on Thursday is expected to follow the signal given by the Pending Home Sales Index in October and decline somewhat.  Here, too, the underlying trend is healthy and consistent with consumers taking advantage of low mortgage rates. It just can’t quite sustain the levels seen in recent months.

Initial jobless claims for the week ended December 14 at 8:30 ET on Thursday are expected to reverse some of the unusual 49,000 increase in the December 7 week. In part it was the unusual jump of 100,697 claims (unadjusted) when the seasonals anticipated only 39,217 claims. The report will have more detail about where these occurred.  Preliminary data puts over a tenth of that increase in California (up 12,367) and another tenth or so in New York (11,162), and nearly that each in Texas (9,996) and Pennsylvania (8,023). It will be interesting to see what the comments about the sector breakdown have to say. Some of the layoffs may be from industries battered by weather, but some of it may also be the usual end-of-year paring of payrolls.

Data on state and regional unemployment rates and payrolls in November at 10:00 ET on Friday could illuminate the exceptional performance in the November Employment Situation with its hefty 266,000 increase in payrolls and dip in the unemployment rate to 3.5%.

The third and final estimate of third quarter GDP at 8:30 ET on Friday will basically be a nonevent. Any revisions at this point from the up 2.1% in the second estimate will read like an afterthought with the fourth quarter well advanced. The Atlanta Fed’s GDPNow estimate for the fourth quarter is a trend-like 2.0% as of December 13. In contrast, the New York Fed’s Nowcast is an anemic up 0.7% for the fourth quarter but it has been revised upward in increments in recent weeks.

Personal income and spending for November is at 10:00 ET on Friday. Another month of modest gains for incomes is expected and perhaps a nice tick higher for spending on stronger sales for durables due to an acceleration in car buying. The PCE deflator may not yet display any lagged effects of the past three Fed rate hikes. FOMC participants, however, are being patient and a reading similar to recent months will not be a concern.

The final University of Michigan Consumer Sentiment Index for December could get revised a touch lower from the 99.2 in the preliminary reading. However, consumers are quite optimistic about the labor market and prospects for its continuance at robust levels. It would take a major downward revision to change the picture in any substantive way. I look for inflation expectations to be revised up a tenth for both the 1- and 5-year measures. The arrival of cold weather means heating bills are going up and there was a big increase in natural gas and propane prices of the sort consumers pay attention to.

The Conference Board’s Leading Economic Index for November at 10:00 ET on Thursday will not get much attention. While low levels of jobless claims, a rebounding stock market, and solid consumer expectations will provide positive contributions, new orders are weak and building permits are expected to decline sharply.

Fed officials have by-and-large exited the public stage in advance of the holidays. Chair Jerome Powell’s press briefing on December 11 will have to serve markets outlook for monetary policy until after the New Year.

 

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