US economic news will dominate today’s release schedule, including the monthly update on residential housing construction for March. We’ll also see new data on initial jobless claims and an early peek at second-quarter activity via the Philly Fed’s index of manufacturing activity in the bank’s district.
US: Housing Starts (12:30 GMT) Yesterday’s encouraging update on sentiment in the home building industry provides support for thinking optimistically about residential real estate's contribution to macro momentum. The NAHB Housing Market Index jumped four points to 56 in the April reading. The bigger-than-expected rise lifts this benchmark to its highest level in three months.
The question today is whether the improving mood will translate into stronger numbers for residential housing construction? Yes, according to economists. Econoday.com’s consensus forecast anticipates improvement in today’s monthly report. Housing starts for March are expected to jump to 1.04m units - a solid rise over the previous month’s 897,000 total.
Newly issued building permits for housing construction support the case for expecting a rebound in today’s data on construction activity. Although starts slumped sharply in February, permits ticked higher, implying that the setback is temporary. If we learn otherwise, however, the news will raise deeper questions about the prospects for the US economy in the wake of yesterday’s disappointing report on industrial production in March.
From the perspective of home builders, however, the upbeat mood in the industry is a prelude to growth. “As the spring buying season gets underway, home builders are confident that current low interest rates and continued job growth will draw consumers to the market,” said NAHB’s chairman said yesterday. Maybe, although let’s see if the hard data on construction offers confirmation for this rosy outlook.
US: Initial Jobless Claims (12:30 GMT) The labour market’s growth slowed sharply in March, which looks even more troubling now that we know that industrial activity suffered a blow last month. US industrial output slumped a hefty 0.6% in March, far more than expected. The red ink marks the third monthly decline in the past four months. But it’s still premature to assume the worst for the business cycle, or so it seems via the upbeat reports in recent weeks for new unemployment filings.
Jobless claims remain close to a 15-year low, signalling that the labour market’s recent slowdown is just a case of short-term turbulence. That message is expected to be reconfirmed in today’s release. The crowd’s looking for a mild tick down in claims for last week’s summary: a decline of 1,000 to 280,000, according to Econoday.com’s consensus forecast. In that case, we’ll have a fresh number for a key leading indicator that suggests that we can look past the recent stumbles in economic releases and assume that growth will pick up in the months ahead.
Even so, it's not so easy at the moment to dismiss the downward bias in industrial production and the monthly estimates on payrolls. But today’s release is widely expected to drop another clue that points to a re-acceleration in the macro trend in the months ahead. Sounds good, although a bearish surprise of any magnitude in the claims data would be an especially dark omen given the economic news of late.
US: Philadelphia Fed Manufacturing Index (14:00 GMT) The mixed messages for manufacturing via the conflicting trends of late in Markit’s purchasing managers index (PMI), which has been rising, compared with the ISM Manufacturing Index (falling), won’t be resolved today. Yet the update from the Philly Fed will provide valuable context for evaluating the outlook.
In the last report, for March, the Philly Fed’s benchmark of manufacturing activity in its district ticked lower again, dipping to the lowest level in more than year. The index is still above the neutral zero line, which equates with growth. But the pace of expansion is mild and slipping.
Given the PMI/ISM divergence in manufacturing it’s difficult to get a clear grasp on the outlook at the moment. Today’s Philly Fed release may provide useful clarity. Based on Briefing.com’s consensus forecast, however, the muddled view of the near term is expected to roll on. The crowd anticipates no change for the headline index, which is on track to remain at 5.0 for April.
The mildly positive reading isn't terrible, but another uninspiring report today will be read in context with yesterday’s disappointing April release for the Empire State Manufacturing Survey. Unfortunately, it’s not obvious that today’s figures from the Philly Fed will provide a bullish counterpoint in a convincing degree.
Disclosure: Originally published at Saxo Bank TradingFloor.com