A look forward to the May 25 week starts with the federal holiday on Monday. Memorial Day is the unofficial start of the summer vacation season. With many workers out of a job and restrictions on activities outside the home, this year is likely to see subdued activity. If locals flock to outdoor recreational areas, travel to them will be limited from tourists. Some states have lifted – partially or more fully – the orders to limit personal contact. However, most individuals will be wary of venturing to restaurants and shops even where businesses advertise their efforts to ensure the health of patrons.
Monday is a full market holiday for bonds and stocks. When these get back to work on Tuesday, there will be plenty of economic data to look over. However, little of it is likely to change the picture of an economy in lock-down and facing an extended period of coming to grips with the harsh realities of operating in an environment of a public health crisis.
What is likely to be the highlight of the week is actually the Fed’s Beige Book on Wednesday at 14:00 ET. This will provide a broad anecdotal assessment of the economy for the period after the last report survey which finished up in the first week of April. Fed policymakers will make use of it at their upcoming deliberations on June 9-10. The intervening six or seven weeks will probably lower the already downbeat tone of the prior report when all District reported growth to be slowing to contracting. The report doesn’t usually reflect across-the-board outright contraction until the trough of a recession, but it looks like the depth of the present downturn has gotten there quickly.
District Bank surveys of manufacturing and services for May will put some hard numbers on what District Bank Beige Book respondents are reporting. The holiday on Monday means some of the usual release patterns are put back a day. The Dallas Fed’s Texas Manufacturing Outlook is at 10:30 ET on Tuesday and its Texas Service Sector Outlook is at 10:30 ET on Wednesday. The Richmond Fed will release its Survey of Manufacturing and Survey of the Service Sector at 10:00 ET on Wednesday. The Philadelphia Fed’s Non-Manufacturing Business Outlook will not be delayed and will be released at 8:30 ET on Tuesday. There are no changes of release pattern for the Kansas City Fed’s Manufacturing Survey at 11:00 ET on Thursday and Service Sector Survey at 11:00 ET on Friday. Available data from the New York and Philadelphia Feds point to slight improvement for manufacturers, but continued very weak conditions. The New York survey for services hints that the non-manufacturing sector has not gotten much relief yet as nonessential public-facing businesses remain shuttered.
The Conference Board’s Consumer Confidence Index for May at 10:00 ET on Tuesday could continue lower after the drop to 86.9 in April from 118.8 in March. In spite of some workers getting recalled due to the Paycheck Protection Program and reopening of activity in a few locations, perceptions of the labor market will be colored by ongoing massive layoffs. The final University of Michigan Consumer Sentiment Index at 10:00 ET on Friday may not see a lot of revision from the 73.7 in the preliminary estimate. Whether up or down a bit, readings for the past two months are still among the weakest since the end of the recession in June 2009, and certainly indicate the dip in confidence is sustained and not just a one- or two-month special circumstance.
Initial jobless claims for the week ended May 23 at 8:30 ET on Thursday are anticipated to remain trending lower but at still significant levels. The rolls of continuing claims should swell further in the May 16 data and the rate of insured employment climb more.
Housing market data is expected to echo other housing reports last week. Sales of new single-family homes in April at 10:00 ET on Tuesday should fall further as consumers avoid making large purchases generally, and long-term pricey commitments specifically. The NAR Pending Home Sales Index for April at 10:00 ET on Thursday will reflect the lack of contracts being signed while consumers stay home and wait out the downturn in the labor market. The FHFA House Price Index for March at 9:00 ET on Tuesday lags much of the other data, but could confirm that gains in prices for home resales and refinancings were losing momentum as the effects of the pandemic were more evident.
New orders for durable goods in April at 8:30 ET on Thursday will include annual revisions in the data. Orders should decline further, but not as much as the 15.3% drop in March as much of the immediate impact of widespread closures had been felt. Nonetheless, weakness in transportation will be clear with so little demand for motor vehicles and aircraft. The one bright spot may be similar as in March as businesses and individuals continued to need to strengthen communications infrastructure while working from home.
Personal income and spending for April at 8:30 ET on Friday could show further deterioration in wages and salaries as businesses remained closed and consumers avoided unnecessary expenditures. There was a signal of consumers’ reluctance to spend in the jump in the savings rate to 13.1 in March. The rate hasn’t seen consistent double-digit readings since the 1980’s, but that may change with the April numbers. In any case, savings tends to increase in advance of a recession or worries about a recession.
The second estimate for first quarter GDP at 8:30 ET on Thursday will revise the down 4.8% reading of the advance estimate, and likely lower. Recent revisions to retail, wholesale, and factory data mean the revision is likely to be more than usual. However, the really bad numbers will be saved for the second quarter GDP reports which are still two months distant. Nowcasts of GDP differ across methodologies from the St. Louis, Atlanta, and New York Feds. However, all are anticipating a big decline. An average of the three estimates puts second quarter down about 40%. Advance estimates of international trade in goods, and inventories for retail and wholesale in April at 8:30 ET on Friday will help shape these up further.
Disclaimer: Whetstone Analysis provides commentary as a service to its subscribers. Whetstone Analysis is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within the site. While the information contained within the site is periodically updated and every effort is made to ensure its accuracy, no guarantee is given that the information provided in this Web site is correct, complete, and up-to-date. Click here to read our full Disclaimer.