18 February 2002, 09:29 OUTLOOK US data to show continued housing strength, uptick in trade deficit
WASHINGTON (AFX) - US economic data to be released this week will
show continued strength in the housing market, which has yet to decline
significantly through the recession since last March, analysts said.
Economists will also look at the December trade report for its
impact on revisions to fourth-quarter GDP growth, which is now looking
stronger than the 0.2 pct originally reported.
The week's releases "will probably not be decisive for the
economy's future direction, but will show manufacturing surveys
continuing to improve, and the labor market stabilising," said Peter
Kretzmer, senior economist at Banc of America Securities.
Starts on new housing construction are expected to show a
significant rise in January, partly on warmer than usual weather last
month.
"Housing starts are always important and we think they will be
stronger in the first quarter after seeing a pickup in home sales and a
decline in mortgage interest rates," Kretzmer said.
Despite falling employment levels, there has been "resilient
demand" for housing, he said.
The solid performance for housing through the recession will
ironically contribute to the rebound being weaker this year than is
usually the case, coming out of most recessions over the past 50 years,
analysts noted.
Most economists do not see GDP growth surpassing 5.0 pct any
quarter this year -- the type of rapid growth that is typically enjoyed
in a rebound, and which is usually boosted by a boom in housing.
Instead, housing will likely have "more of a neutral impact" on GDP
this year, said Mike Carey, economist at Credit Lyonnais.
"It's not going to be the sector that's leading you out of
recession" this time, he said.
The trade deficit is forecast to have widened in December, although
at a lesser rate than forecast by the Commerce Department when it
produced its advance estimate for fourth quarter GDP.
As a result, GDP could turn out to have been stronger than the 0.2
pct first reported despite initial conclusions made last month that the
figure would be revised down.
The strength seen in January's retail sales report, which was
revised to show a 0.2 pct rise in December instead of a 0.1 pct drop,
prompted many economists to revise their GDP estimates both for the
fourth quarter and the first quarter.
Kretzmer said fourth-quarter GDP now looks to have risen between
0.5-1.0 pct, thanks to even stronger consumer spending. Consumption was
originally estimated to have grown 5.4 pct last quarter, the strongest
in almost two years.
With January retail sales showing the biggest rise excluding autos
since March 2000, at 1.2 pct, economists also looked twice at their
first quarter forecasts.
Most economists had forecast consumption to decline, or show a
small positive growth rate in the first quarter.
Now, first-quarter GDP "should show a gain of at least 2.0 pct,
with the risk of a much bigger gain," said Rick MacDonald, economist at
Standard & Poor's MMS.
Auto sales, which are expected to drop considerably this quarter
after very strong incentive-stimulated sales last quarter, are now seen
dropping only back to their pre-September trends, MacDonald said.
"So that sets a good trajectory for the first quarter," he said.
Goldman Sachs forecast 2.0 pct growth in the first quarter, with
the risks "skewed upward," while UBS Warburg raised its forecast to 2.0
pct from 1.0 pct.
Lehman Brothers raised its forecast to 2.5 pct growth from 0.5 pct,
and now conclude that the recession ended in January. The recession
officially began in March of last year, according to the National
Bureau of Economic Research (NBER -- the official arbiter of US
business cycles).
The NBER typically takes many months before it announces a
recession to have officially ended.
Barclays economists see first quarter GDP rising 3.5 pct -- a
growth rate Treasury Secretary Paul O'Neill has said could be reached
only "by the fourth quarter."
The week's data will also show a rebound in consumer prices, after
they fell 0.2 pct in the fourth quarter.
The headline inflation rate will be boosted by energy prices, while
the core rate is seen rising on the back of increasing service-sector
costs.
Kretzmer noted that while prices in the goods sector of the economy
have actually declined, rising health care and other service costs
"have been moving right along."
In any case, "people are mainly keyed into the real economy" at
this point, and will pay the CPI report little attention, said Robert
McGee, chief economist at Tokai Bank in New York.
The following are the consensus forecasts of Wall Street economists
for indicators to be released this week:
JANUARY HOUSING STARTS, Tuesday (8.30 am): Housing starts are
expected to show a 1.3 pct rise to 1.59 mln units at a
seasonally-adjusted annual rate. Starts fell 3.4 pct to 1.57 mln units.
JANUARY CPI, Wednesday (8.30 am): Consumer prices are seen rising
0.2 pct in January from the previous month after they were down 0.2 pct
on falling energy prices in December. Excluding food and energy, the
core CPI is expected to rise 0.2 pct for the month, after a 0.1 pct
rise in December.
Economists noted that January's CPI report could be more volatile
than normal due to scheduled revisions to the seasonal factors the
Bureau of Labor Statistics uses in calculating the adjusted figures. An
update to weights assigned to different categories could also impact
the report.
DECEMBER TRADE BALANCE, Thursday (8.30 am): The trade deficit is
forecast to widen to 28.6 bln usd in December, from 27.9 bln the
previous month.
The trade report will be "the last piece of the puzzle" for
fourth-quarter GDP revisions, as it will illustrate how much of the
consumer spending rise in December was due to imports -- which detract
from GDP. Economists expect the trade report to prompt an upward
revision to GDP last quarter.
The trade deficit is expected to continue widening this year, as
the US economic growth leads to rising imports.
WEEKLY JOBLESS CLAIMS, Thursday (8.30 am): Initial claims for
regular weekly unemployment benefits are seen staying steady at 373,000
for the week ended Feb 16, after they were down 8,000 the previous
week.
"We probably have" seen the high point for jobless claims in this
recession, Carey said, and "claims should continue to edge down" in
coming months, leading to an expansion in non-farm payrolls "as soon as
this quarter."
JANUARY LEADING INDICATORS, Thursday (10.00 am): The index of
Leading Economic Indicators is seen rising for the fourth straight
month, by 0.5 pct in January. In December, the index rose 1.2 pct.
"The surge in the index since last October is one more sign that
the economy appears to have turned the corner," Lehman Brothers
economists said, with January's rise being led by the decline in
jobless claims and an uptick in monetary growth.
PHILADELPHIA FEDERAL RESERVE INDEX, Thursday (12.00 pm): The
Philadelphia Federal Reserve Banks' index of business activity in its
district is seen at 13.0 for January, after coming in at 14.7 in
December.
The December reading was the first positive one for the index since
Nov 2000. A reading above zero indicates an expansion in activity
"The manufacturing sector is certainly on the upside of a
transition here," Kretzmer said.
JANUARY FEDERAL BUDGET REPORT, Thursday (2.00 pm): The federal
government is forecast to record a 43.67 bln usd surplus in January,
down from the 76.38 bln surplus in January of last year.
The recession has sharply eroded corporate tax receipts, while
higher government spending in the wake of the Sept 11 terrorist attacks
has also hit the federal budget. Last year's tax cut has also reduced
the surplus.
© 1999-2024 Forex EuroClub
All rights reserved