Weekly Economic Indicators

The economic release schedule for the week of February 27th  is as follows:

  • Monday:  Pending Home Sales Index

  • Tuesday:  Durable Goods Orders, S&P Case Shiller HPI, and Consumer Confidence

  • Wednesday:  GDP, Chicago PMI, and Beige Book     

  • Thursday:  Motor Vehicle Sales, Chain Store Sales, Initial Jobless Claims, Personal Income and Outlays, ISM Mfg Index, Construction Spending, and Fed Balance Sheet.

  • Friday:  None 

Click this link for a more comprehensive economic calendar for the week:  http://www.bloomberg.com/markets/economic-calendar/


Economic Indicators - What to Watch

This week I spoke with Gordon Charlop Ph.D. Managing Director, Rosenblatt Securities and frequent CNBC commentator, about what he will be watching this week.  Charlop will focus on the overall market, consumer confidence, higher oil prices, ISM Manufacturing Index, housing data, GDP, and initial jobless claims.  A complete list of economic indicators is above. 


Overall Market

Charlop believes the markets are “flirting“ with the numbers now, with the Dow up close to 13K and the Wilshire 5000 and other indicies at all time highs.  Overall health, coupled with consumer confidence is fueling the rally and US equities seem to be enjoying the “risk on” move.  He thinks we might have a performance squeeze where Hedge fund managers are forced into market, rather than sit on the sidelines.  However, Charlop added, the rally is not as powerful as people might think, since it has been accompanied by low volumes and low volatility.  He is concerned with the high consumer debt to income ratio, which still averages over 100%.  He hopes as investor portfolios improve, people will take some of the new found wealth and pay down existing debt which could spur the economy.  


Consumer Confidence

Charlop calls consumer confidence data a “validation of the excuses”.  It’s a qualitative analysis, which has an element of unreliability.  That being said, consumer confidence is done monthly, and the variables are measured equally, so a movement of 10% or more in either direction is significant.  Since the data gives clues to consumer spending, if consumers are over spending it could lead to inflation, and if consumers are under spending, it could lead to deflation.  Separately, Charlop believes the Federal Reserve Board will have to reevaluate its position on interest rates later in the year, which is an important indicator of macro events. 


Higher Crude Oil Prices and ISM Manufacturing Index

Charlop says that manufacturing data is hard to predict today, as so much manufacturing is outsourced.  At some point, he believes China will start pushing wages upwards and shipping costs will increase, forcing companies to start bringing manufacturing jobs back to the US.  On higher crude oil prices, Charlop believes a number of factors play into prices, including demand growth, shortage from Iran’s supply, and unseasonably mild winter, especially in the Northeast.  He added the world is consuming a lot more oil today, with the US consuming about 25% of the total global supply.  If we see gas prices hitting $5 a gallon, it will really hurt consumers, and it could cause demand destruction.  He went on to say, the US must seek alternative energies, and auto manufacturers have to continue to build energy efficient vehicles.


Housing Data

This week investors will get pending home sales and the S&P Case-Shiller Home Price Index.  Charlop said we will continue to see uneven growth in the housing sector.  He pointed out that metropolitan areas will realize more sales because new homeowners will enter this market, the demographics of the population will change, and people will be moving into new neighborhoods.  Whereas areas like Nevada and Florida, where developments have been over built and undersold,  there will be significant hits.  He thinks it will be a while before homebuilders get back to where they were before the crisis, but clearly the trend it moving in the right direction.  In the markets, some of the major homebuilders have attracted interest from investors, as this sector has bottomed out and is viewed as cheap equity.


GDP and Initial Jobless Claims

He expects the unemployment rate to come in line with expectations, but if the rate drops below 8% he anticipated the equity markets will take off, and the US will begin to realize better than expected growth.  He is encouraged by the trend in initial jobless claims, and anticipates the jobless claims to come closer to the 300K mark.  What he would like to see is a steady decline in the unemployment numbers with sustained growth.  We also need the Euro and US dollar to stabilize, as gold is continuing to outperform.