Here are our estimates for the week's economic data:
Consumer confidence (Today, April 26th) – The Conference Board consumer confidence index fell from 72 to 63.4 in March amid the increase in oil prices and the uncertainties for the global economic outlook. Our expectations are for the index to slightly rebound in April thanks to the improvement in the labour market. Our estimate is for the index to rise to 64. Should our estimate prove correct, the index will remain below its long term moving average, signaling that the consumer spending rate of growth is likely to grow at a moderate pace in the next few months.
Durable goods orders (Wednesday 27th) – Following the negative results in January and February, when orders fell by 2.9% m/m and 0.3% m/m respectively – durable goods orders ex-transportation are likely to rebound by 2.2% m/m, in line with positive indications coming in the last few months from business confidence indices. The headline data is also expected to increase following the 0.6% m/m decline in February: our estimate is for a 1.3% m/m increase. The data should indicate that industrial sector recovery is likely to continue in the next few months.
FOMC rate decision (Wednesday 27th) – The FOMC is expected to confirm at the end of next week’s monetary policy that the QE2 program will finish according to schedule in June despite some members' preference for it to end earlier. Indeed, the Fed’s Chairman Ben Bernanke clearly indicated in his latest speeches that he would not favour an early termination of the program as he judges inflationary pressures as temporary and considers the unemployment rate as still too high. The focus will be on the press conference of Fed Chairman Bernanke at the end of the meeting – the first ever – as it will give more details on the monetary policy outlook. We expect the Fed to continue to reinvest principal payments on the securities it holds in the next few months and we do not expect the Fed to start hiking rates before 2012.
Gross domestic product (Thursday 28th) – Following the 3.1% increase in Q4 ’10, U.S. economic activity is expected to grow at a more moderate pace in Q1 ’11: our estimate is for a 2.2% annualized growth. Consumer spending is likely to be the main contributor to economic growth, even if a slowdown from the previous quarter is expected: from 1% q/q to 0.4% q/q. Total investments are likely to be only slightly positive while net trade is likely to subtract from economic growth, with imports climbing by 2% q/q and exports rising by 0.7% q/q. We expect economic growth to rebound in the following quarters, in line with a 2.8% rate of growth in 2011 as a whole.
Pending home sales (Thursday 28th) – Pending home sales are likely to confirm that the housing market may slightly improve in the next few months following the weakness in early 2011, even if the rate of growth is likely to remain very subdued. Following the 2.1% m/m increase in March, pending home sales are likely to grow by a further 2% m/m, reflecting the slight recovery in the labour market. However this data should not signal a strong recovery for the sector in the next few months.
Chicago PMI (Friday 29th) – In March the Chicago PMI remained close to the highest level since July ’98, edging down from 71.2 to 70.6. In line with business confidence indices already released in April, we expect the Chicago PMI to continue indicating that the industrial sector outlook remains positive in the short term amid the strength in global demand; our estimate is for the index to remain unchanged at 70.6.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.