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End-of-Week Economic Data

05/24/2013

In the wake of Wednesday’s FOMC minutes release, increased speculation regarding when the FOMC will begin tapering its monthly asset purchase program has taken center stage in the business media. Much of the speculation should be viewed as pure noise and not actionable. However, I found it rather interesting that the Wall Street Journal’s Jon Hilsenrath quickly appeared on our CNBC Halftime show yesterday, less than 24 hours after the FOMC minutes release.

Jon is widely regarded, and I would argue correctly viewed, as the journalist closest to the Fed.  He is, almost, in a sense, the Fed’s messenger to Wall Street. I am pretty certain, having participated in yesterday’s conversation with Jon, that I received the post-minutes message loud and clear. Yes, the Fed wants to taper, but “when” is strictly data dependent, the outcome of which is unknown.

The level of attention investors must now pay to economic data releases has increased. Let’s take a look at some of the data released over the past 48 hours.   

Thursday May 23, 2013

  • Initial Jobless Claims fell from 363,000 the prior week to 340,000
  • The four week moving average (Fig 1.1) for claims fell to 339,500 from 340,000
  • This week’s claims figure corresponds with the Labor Department survey that will help generate the May labor report for June 7
  • Current estimates for the June 7 Labor report are for a modest rise from last month’s +165,000 headline to +175,000/+185,000 headline
  • Sales of New Homes (Fig 1.2) increased +2.3% to 454,000, a three month high
  • Home prices have increased +7.2% from March 2012 to March 2013, the largest March on March yearly comp since 2006
  • Home prices were reported up +1.3% month on month, the largest monthly gain in 22 years

Friday May 24, 2013

  • Durable Goods Orders in April rose +3.3% after falling -5.9% last month
  • Durable Goods Orders Ex-Transportation rose +1.3% after falling -1.7% last month
  • Durable Goods Orders Ex-Defense rose +2.1% after falling -4.4% last month
  • Highly volatile Defense Orders rose 31.3% almost reversing last month’s -38.3% decline
  • Capital Goods Orders Ex-Air & Defense, used to calculate GDP, fell -1.5% after rising +0.5% last month  

Commentary:  There is not enough conclusive evidence in either direction to provide clarity on Fed intentions post Wednesday. Next week’s holiday shortened U.S. economic calendar includes Consumer Confidence, Dallas & Richmond Fed Manufacturing Indices, GDP, Pending Home Sales, and, of course, weekly Initial Jobless Claims. The following week, the first week of June, begins with ISM Manufacturing (Fig 1.3), which recorded a disappointing 50.7 last month. It appears the first of week of June will provide tremendous insight for both the markets and the FOMC ahead of their June 18 meeting. My expectation remains the same for June’s meeting - no change to the current pace of monthly Fed purchases.

Fig 1.1 Initial Jobless Claims 4 Week Moving Average May 2012 to May 2013

Source:  Bloomberg

 

Fig 1.2 New Home Sales in Units Annualized 2007 to 2013

Source:  Bloomberg

 

Fig 1.3 ISM Manufacturing Year To Date

Source:  Bloomberg

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