Though much has been said about the sustainable recovery that is getting entrenched in the U.S. economy, there is no denying of the fact that the recovery has been painfully slow. The fits and starts recovery could be blamed on the unsteady take off in consumer spending, primarily due to the destruction of household wealth associated with the drop in home prices. The housing boom seen between 2001 and 2005 has resulted in bloated inventory levels, giving very little incentive to build. Additionally, the government is going about a spending freeze, that is stifling employment growth and income gains.
The U.S. economy is set to expand at a below-par rate of 2.3 percent in 2012, according to estimates by State Street Advisors. The firm expects the improvement to continue into 2013, although cautioning that a fiscal squeeze may slow it down further.
With the housing market remaining in the eye of the storm, any information on how the recovery in this sector is panning out will render more clarity on the economic trajectory. Last Friday, a Commerce Department report showed that new home sales unexpectedly fell for the second month in February, declining by 1.6 percent to a seasonally adjusted annual rate of 313,000. This represents the lowest level since October.
Inventories measured in terms of months of supply rose to 5.8 months in February from 5.7 months in January. That said, the median sales price of a new home rose 8.3 percent month-over-month to $233,700.
The National Association of Realtors reported that U.S. existing home sales fell 0.9 percent month-over-month to 4.59 million units. Meanwhile, the previous month's reading was upwardly revised by 1.3 percent. Single-family home sales fell 1 percent, while condominium sales remained unchanged. The median price of an existing home rose 0.3 percent year-over-year to $156,600.
Also, U.S. housing starts fell by 1.1 percent month-over-month to 698,000 in February. However, the negativity was offset by an upward revision to the previous month's starts to 706,000. A 9.9 percent drop in single-family starts more than offset a 26.2 percent increase in multi-family starts. At the same time, building permits jumped 5.1 percent to 717,000, the highest level since October 2008.
Meanwhile, the National Association of Home Builders reported that its housing market index remained flat at 28 in March following 5 straight months of gains. The index is still at its highest level since June 2007. The present conditions index fell 1 point, while the sales expectations index rose 2 points and the index measuring prospective buyer traffic remained unchanged at 22.
Several key economic reports are due in the unfolding week, as traders seek clarity, especially after last week's lackluster housing reports. Traders may closely watch the National Association of Realtors' pending home sales report for February, the Conference Board's consumer confidence report for March, the Commerce Department's durable goods orders report for February, the weekly jobless claims report, the final reading of the Reuters and the University of Michigan's consumer sentiment survey and the personal income and spending report for February.
A host of Fed speeches, including 3 public appearances by Federal Reserve Chairman Ben Bernanke, are also due for the week. Also scheduled for the week are some regional manufacturing surveys, with the ISM-Chicago's business barometer being the notable among them. The results of the Treasury auctions of 2-year, 5-year and 7-year notes, the S&P Case-Shiller house price index for January and the final fourth quarter GDP report round up the economic events of the week.
Consumer sentiment is expected to get a shot in the arm from the equity market's resilience. That said, the recent rise in gasoline prices may mitigate some of the optimism.
Durable goods orders are likely to have seen a rebound, thanks to a solid increase in aircraft orders secured by Boeing. However, economists expect business machinery and equipment demand to remain soft, as the year-end tax incentives would have pushed back some of the year's purchases.
An increase in the number of hours worked points towards employment growth and in turn a decent increase in personal income. At the same time, personal spending may have received support from higher gasoline prices. Nevertheless, real personal spending is also expected to see a healthy gain.
Philadelphia Federal Reserve Bank President Charles Plosser is due to discuss monetary policy issues on a panel with former Bundesbank President Axel Weber and Christain Noyer, governor of the Banque de France, at the Banque de France in Paris at 7:30 am ET. Plosser will also take questions from the audience and also from the media.
Additionally, Federal Reserve Chairman Ben Bernanke is scheduled to deliver opening speech at National Association for Business Economics in Arlington, Virginia at 8:45 am ET. Congressional Budget Office Director Douglas Elmendorf will also speak during the conference following Bernanke.
Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET. A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. The index is expected to have risen 1 percent in February.
The pending home sales index rose by a better than expected 2 percent month-over-month in January. The previous month's reading was upwardly revised to show a 1.9 percent decline rather than the 3.5 percent drop estimated initially. Pending home sales rose in the Northeast and the South, while pending sales fell in the West and the Mid-west.
The results of a regional manufacturing survey carried out by the Dallas Federal Reserve are due to be released at 10:30 am ET. The business activity index based on the survey is expected to slip to 15.5 in March from 17.8 in February.
Boston Federal Reserve Bank Pres. Eric Rosengren is scheduled to speak to the National Institute for Economic and Social Research in London.
The S&P/Case-Shiller home price index, which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S., is scheduled to be released at 9 am. Economists expect a seasonally adjusted 0.2 percent month-over-month drop in the 20-city composite house price index for January.
Prices of houses in the top 20 metropolitan cities declined in December, with the corresponding indicator declining 0.5 percent month-over-month. On a year-over-year basis, house prices declined 4 percent.
The Conference Board is scheduled to release its consumer confidence report for March at 10 am ET. The report, which is based on a survey of 5,000 U.S. households, is expected to show that the consumer confidence index rose to70.9 in March.
The consumer confidence index rose to 70.8 in February from 61.5 in January. The present situation index climbed 6.2 points to 45, while the expectations index surged up 11.3 points to 88. The respondents finding "jobs hard to get" declined in February, confirming the labor market revival.
The Richmond Federal Reserve's manufacturing index due to be released at 10 am ET is expected to see a 2-point drop to 18 in March.
Bernanke will deliver the third of four lectures at the George Washington School of Business at 12:45 pm ET, the final one to follow March 29.
The Commerce Department is set to release its durable goods orders report, which gives the value of orders placed for goods designed to last for more than 3 years, at 8:30 am ET. Economists expect a 2.9 percent increase in durable goods orders for February. Excluding transportation, orders may have risen 1.5 percent.
In January, durable goods orders fell 3.7 percent month-over-month following three straight months of gains. However, shipments, unfilled orders and inventories were up modestly. Transportation orders may have fared better in February, as Boeing reported at its website 237 airplane orders for the month compared to 150 in January.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended March 23rd at 10:30 am ET.
Crude oil inventories fell by 1.2 million barrel to 346.3 million barrels in the week ended March 16th. Stockpiles remained in the upper limit of the average range.
Gasoline inventories fell by 1.2 million barrels but remained in the upper limit of the average range. On the other hand, distillate inventories rose by 1.8 million barrels, remaining in the upper limit of the average range. Refinery capacity utilization averaged 83.1 percent over the four weeks ended March 16th compared to 83.9 percent in the previous week.
St. Louis Federal Reserve Bank President James Bullard is scheduled to speak to a monetary policy conference at Tsinghua University in Beijing at 9 pm ET.
The Bureau of Economic Analysis is due to release its final estimate of fourth quarter GDP at 8:30 am ET. Economists expect the GDP estimate to be left unrevised at 3 percent.
The Labor Department is due to release its customary jobless claims report for the week ended March 24th at 8:30 am ET. Economists expect claims to edge up to 350,000 in the recent reporting week.
Initial jobless claims fell to 348,000 in the week ended March 17th from the previous week's revised figure of 353,000. The drop surprised economists, who had expected jobless claims to edge up to 352,000 from the 351,000 originally reported for the previous week. With the unexpected decrease, jobless claims fell to their lowest level since coming in at 347,000 in the week ended March 8, 2008.
The Kansas City Federal Reserve is scheduled to release the results of its manufacturing survey for February at 11 am ET.
Plosser will also speak to the Rotary Club of Wilmington at 1 pm ET. He will also take questions from the audience and later, from the media.
Atlanta Federal Reserve Bank President Jeffrey Lacker is due to speak to the UNC School of Law's Banking Institute and will take questions from the audience and the media, in Charlotte. The speech is scheduled for 6:45 pm ET.
The Bureau of Economic Analysis is due to release its personal income & outlays report for February. Economists expect the report, which is due out at 8:30 am ET, to show that personal income rose 0.4 percent and personal spending increased by 0.6 percent.
In January, personal consumption rose by a mere 0.2 percent month-over-month. In real terms, consumer spending remained almost unchanged. Spending on durable goods increased, while spending on services was unchanged. The savings rate edged down 0.1 points to 4.6 percent.
The results of the Institute of Supply Management-Chicago's business survey for March are scheduled to be released at 9:45 am ET. Economists expect the business barometer index based on the survey to slip to 63.
The Chicago business barometer index rose to 64 in February from 60.2 in January. The new orders index rose 5.6 points to 69.2 and the order backlogs index climbed 5.3 points to 50, while the production index was up 4 points. More importantly, the employment index rose about 10 points to its highest level since May 1984.
The Reuter and the University of Michigan's final report on the consumer sentiment index for March is scheduled to be released at 9:55 am ET. The consumer sentiment index is expected to be upwardly revised to 75 from the mid-month reading of 74.3.
by RTT Staff Writer
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