Tuesday’s a slow day for macro updates in Europe, but several key US reports are scheduled today, including the September data on new orders for durable goods. Later, we’ll see fresh numbers on US house prices via the Case-Shiller indices, followed by the Conference Board’s October estimate of consumer confidence.
US: New Orders for Durable Goods (12:30 GMT) The monthly comparison for this indicator has been unusually volatile lately. Indeed, new orders tumbled more than 18% in August against the previous month. The extraordinarily large decline followed an unusually hefty gain in July.
But pay no attention to the short-term fluctuations. Most of the roller-coaster ride lately has been due to aircraft orders, which have a habit of skewing the numbers and dispensing misleading short-term signals. Instead, stay focused on the slightly more reliable year-on-year changes, which have been posting a run of gains in the past six months.
If the crowd’s forecast for a modest rise in today’s September report is accurate, the annual pace for durable goods will post its seventh consecutive increase.
Showing durability: goods that last are expected to maintain their rise. Photo: Thinkstock
New orders for last month are projected to rise 0.6% based on the consensus forecast, according to Briefing.com. That expected rise translates into a 5.2% advance for September against the level a year previously.
Note too, that orders for the so-called the business investment component – non-defence capital goods ex-aircraft – has been posting annual gains lately. That’s a clue for thinking that corporate America’s appetite is willing and able to expand manufacturing capacity. If so, the case for projecting economic growth generally will receive a new dose of support in today’s update.
Earlier this month we learned that US industrial output surged 1% in September, with the manufacturing component rising a healthy 0.5% (which works out to a 3.7% annual increase). The upbeat production data suggests that orders for durable goods will deliver a similarly encouraging batch of numbers today.
US: Case-Shiller Home Price Index (13:00 GMT) The torrid pace of recovery that prevailed in the US housing market in 2013 is ancient history, but the optimistic view is that moderate growth will prevail for the foreseeable future.
“We always knew these market conditions couldn’t last, and it’s good to see us now on a more natural and sustained glide path down toward more normal market conditions,” recently advised the chief economist at Zillow, a real estate data firm.
Recent updates on construction activity for residential housing align with the outlook for moderate but ongoing growth. The year-on-year pace of new construction has been consistently positive since April. Meanwhile, existing home sales perked up last month, rising a bit more than expected while yesterday’s September report for the Pending Home Sales Index increased over the previous month – a gain that suggests that the positive momentum of late will roll.
Home prices, however, have been falling recently. In each of the three months through July, the Home Price Index (HPI) declined, the first case of red ink since 2011. Is this a sign of trouble for residential real estate? No, at least not yet. Prices are still rising at an annual pace, albeit at a relatively modest 6.7% rate in the last release.
The year-on-year trend we've seen lately is expected to persist in today’s report, albeit at a slightly lesser rate. The consensus forecast sees prices climbing 5.8% in August against the year-earlier level for HPI’s 20-city benchmark in unadjusted terms.
The crowd’s also looking for a round of revival in the monthly comparison: a 0.1% rise (seasonally adjusted), which would be the first increase in prices since April. Impressive? Not particularly, although the forecasts, if they hold up, will strengthen the view that something approximating normality is returning to the housing market.
US: CB Consumer Confidence Index (14:00 GMT) The economic numbers lately have been encouraging, although the evidence remains limited for expecting US growth to accelerate much beyond the modest growth path of recent years. The Conference Board’s index of consumer sentiment has been suggesting otherwise, although a dose of reality nipped this benchmark in September.
Today’s update for October is expected to revive slightly, with Econoday.com reporting an expected advance for the index to 86.8 against 86.0 in the previous release. Based on real (inflation-adjusted) retail spending, however, expectations deserve to be muted. Although real consumption is still growing on an annual basis, there’s been a slight downward bias in the trend lately. Does that mean that today’s sentiment data will disappoint the market? Not necessarily. The preliminary October estimate of the Reuter's/University of Michigan's consumer sentiment index reached a seven-year high. Retail spending may be trending lower, but consumer spirits remain buoyant, in part because the labour market continues to expand at a slightly faster pace lately.
“Sluggish wage growth will continue to weigh on confidence, but better job market fundamentals and more stabilised financial conditions will likely lead the rebound in [the CB Consumer Confidence Index in] October,” predicted Credit Agriole last week. “We look for a 1.4-point rise to 87.4.” 
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