The week following Memorial Day claims the mantle of the unofficial beginning to summer. It also means a compressed business week, including the unleashing of a variety of economic reports. Highlights this week include:
- The Standard & Poor's/Case-Shiller home price index, due at 9 a.m. Tuesday (all times Eastern)
- Consumer confidence for May, due at 10 a.m. Tuesday
- First-quarter gross domestic product revised, due at 8:30 a.m. Thursday
The housing market
The continued ascendancy of the housing market has been welcomed by homeowners, investors and financial regulators alike. Aided by the Federal Reserve's monetary policy (the combination of low interest rates and $85 million in monthly asset purchases), home sales, mortgage rates and prices have seen steady improvement.
This week, the S&P/Case-Shiller home price index provides a fresh status report. As mentioned in a report from Mesirow Financial chief economist Diane Swonk, the federal government told us that home prices rose 1.3 percent in March, up 7.2 percent from a year earlier. She credits rising home prices for encouraging refinancing, "allowing homeowners to keep spending even as the end of the payroll tax holiday put a pinch on take-home pay."
Swonk notes that healing of the housing market is "critical for a more broad-based improvement" in the job market. We know the Fed wants a steady and sustainable improvement in the employment outlook before it can begin unwinding some of its extraordinary measures.
Consumers hanging in there
There was a rebound in consumer confidence reported by The Conference Board a month ago. We'll see if much has changed this week. In the previous reading, the business research group said its index had risen 6 points, to 68. That is still low by historical standards. Part of the improvement was said to be linked to surging expectations after Washington, D.C., caused concerns connected to the fiscal cliff, the payroll tax hike and the sequester. Lynn Franco, director of economic indicators at The Conference Board, had said that it was too early to say whether confidence was "actually on the mend."
Since the earlier report, we've had a better-looking jobs report and a steady rally in the stock market.
US growth engine
We get a revised look this week at U.S. growth, or gross domestic product, in the first three months of the year. The initial reading a month ago was put at 2.5 percent. Not much to write home about, according to David Wyss, adjunct professor at Brown University. Wyss, former chief economist for Standard & Poor's, calls the recent trend "half-speed growth." He adds, "We'd like it to be a lot better than that. On the other hand it's positive."
Wyss says if the U.S. economy can maintain this pace, and if the job market continues to slowly improve, the Federal Reserve will begin to trim its asset purchases.
OK, but what about the revision?
GDP reports are constantly revised and often the revisions can surprise the financial markets, either negatively or positively. Regarding this week, Jeffrey Rosen, chief economist with Briefing.com, says, "The April retail sales report highlighted upward revisions to goods spending in March and the March trade report showed a smaller trade deficit." Taken together, he says, "those factors will likely offset weaker-than-expected inventory growth," so he thinks there could be a small upward adjustment from the initial 2.5 percent growth rate.
This week in business history
It would be a most grim anniversary, if it had not been followed by positive developments. On June 1, 2009, General Motors filed for bankruptcy. What followed was a dramatic restructuring, exit from Chapter 11, an initial public offering and a profitable company that was better able to compete. The Pontiac and Saturn brands were shed and a sometimes bitter political debate has focused on the federal government's bailout.
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