Prepare for another busy day of economic news from the US, including the weekly update on initial jobless claims. We’ll also see another early clue for manufacturing data in February via the Philly Fed’s regional numbers. Later, the Conference Board updates the big-picture outlook with the January release of its Leading Economic Index.
US: Initial Jobless Claims (1330 GMT): Last week’s update on new filings for unemployment benefits delivered upbeat news—and not a moment too soon. Previously, it looked as if the jobless claims trend was caught in a bearish pattern, based on upwardly biased numbers in recent months. But last week's release broke the worrisome trend, dispensing a timely piece of good news for the near-term outlook. Today's question: Was that welcome news release just a one-time event? The crowd will be eager to learn if today’s update builds on last week's bullish reversal.
Briefing.com’s consensus forecast sees a modest increase for today’s weekly release. Jobless claims are expected to rise 5,000 to a seasonally adjusted 274,000 for the week through February 13. In other words, some of the previous week’s improvement is due to fade, although not enough to push this leading indicator back into a bearish posture.
Short of a sharply higher number above 290,000 mark, it’s reasonable to interpret today’s data as signalling that the labour market will continue to expand.
Indeed, yesterday’s revised estimate of first-quarter GDP growth for the US was fractionally lower at 2.6% (seasonally adjusted annual rate) via the Atlanta Fed’s GDPNow model. But the new projection continues to anticipate a solid rebound after last year’s tepid 0.7% gain in Q4. It would be surprising if today’s update on jobless claims conflicts with that forecast.
US: Philadelphia Fed Manufacturing Index (1330 GMT) : Yesterday’s figures on industrial activity revealed a sharp rebound in output for January after several months of contraction. Is that a sign that manufacturing’s troubles are finally set to ease?
The jury’s still out on that question, although Tuesday’s early look at the February data via the New York Fed’s manufacturing index offered a glimmer of hope. True, this regional manufacturing benchmark remained deep in negative territory, although the degree of red ink eased a bit.
Meanwhile, the Federal Reserve’s report on industrial activity for last month shows a solid rebound for the manufacturing component in January after contracting in each of the previous two months. Will the tail wind carry over into February? Today’s update from the Philly Fed may offer a clue.
The crowd’s looking for a degree of good news, albeit in the form of a slightly lower rate of contraction via Econoday.com’s consensus forecast. The headline index is expected to tick up to a negative 2.5, a slightly higher reading following vs. January’s negative 3.5.
That’s weak tea in the cause of looking for a manufacturing recovery. But if today’s update matches expectations, we’ll have a second regional manufacturing report for February that hints, ever so subtly, that better days may lie ahead for the embattled US manufacturing sector.
US: Leading Economic Indicator (1500 GMT): With most of the major economic indicators for January published, it’s safe to say that the first month of 2016 probably wasn’t the start of a new US recession. That's easy to say now, of course, although the outlook was a bit shaky earlier in February.
But if the worst-case scenario for the business cycle is still a low-probability event, there’s still the challenge of relatively slow and perhaps sluggish growth, as today’s January update of the Conference Board’s Leading Economic Index is expected to reaffirm.
Economists project that LEI will tick lower for the second month in a row, posting another 0.2% decline, according to Econoday.com's survey data. That’s not horrible, since another small setback will still leave LEI near a post-recession high.
Nonetheless, the expected dip will serve as a reminder that the extent of optimism for the US macro trend is constrained these days. Modest growth continues to be a reasonable guesstimate for economic activity in the first quarter, but the evidence for projecting anything stronger is still thin, as today’s LEI update is expected to show.
Disclosure: Originally published at Saxo Bank TradingFloor.com