Economic Highlights For The Week Ahead

April 25, 2014

Last week: The Conference Board Leading Economic Index pointed to some faster growth in the U.S. economy this spring and summer.  Two important ingredients, beyond recovery from a bad winter, are improving sentiment and a pickup in demand, signaled by improving orders.  This past week, data on orders for durable goods suggested the ordering rate is gaining traction.  This coming week will provide a fresh read on the state of consumer sentiment.  One big question: Do consumers perceive the same economic gravity shown in the ordering and indicator data?

The Conference Board Consumer Confidence Index

The economic data point to an improving economic environment.  Are consumers buying it?  Confidence did gain a little in February and again in March.  Did this continue in April?

Gross Domestic Product - 1Q 2014 (Bureau of Economic Analysis)

This first read on the economy in the first quarter will show the impact of sharp and widespread inclement weather - reducing job growth and limiting consumer shopping.  If the rise in GDP comes in close to 1.5 percent (annualized), that number will be well below the underlying rate of growth in the economy, and set the stage for a second quarter report that will overstate it, as shopping and home building catch up.

Personal Income and Outlays, March (Bureau of Economic Analysis)

Income growth has generally been in a range of about 0.2 to 0.3 percent.  Spending was slower in February, due to sustained bad weather.  There is a chance that spending in March rose faster, as shoppers were able to get to the stores.  April, in turn, will show even more of that.  The bigger issue is whether job growth and a rise in wages will be enough to move income growth above the 0.2 to 0.3 range.

Employment Situation, April (Bureau of Labor Statistics)

The economy opened up a little more than 180,000 new jobs in March.  The figure for April could be just over 200,000, reflecting an economy that is gaining strength and catching up from this past winter.  That much job growth is likely to feed household sentiment and boost shopping.  The big question is whether all this will be enough to generate more capital investment in equipment.  In other words, business clearly is investing in more workers, but do they have enough equipment for the staff to get the job done?  Money for investment is not the issue.  Indeed, neither is sentiment as surveys of attitudes of business executives through the first quarter reflect an uptick in optimism.

An uptick in consumer spending and business investment is a recipe for continued job growth of more than 200,000 per month for at least the next few months.  In other words, the economic cycle could start spinning a little faster, just as The Conference Board Leading Economic Index has been signaling.  Look for more construction jobs, service sector jobs, perhaps even some manufacturing jobs.

Regionally, hiring has been the weakest in the service-dominated big population centers in the Northeast and Midwest.  If the labor market is turning more robust, it is likely that service-sector employment in those states is about to pick up.