The US economic data released so far this week do not provide firm evidence that the US economy has picked up enough steam to allow the Fed to hike -- if that is what officials are looking for.
a. Initial Claims show that layoffs eased in February and March, with Continuing Claims beginning to catch up in March. But, the latest week's 265k print for Initial Claims is near the October-February trend and raises a caution flag.
b. The levels of Home Sales and underlying Durable Goods Orders were little changed over January-February compared to their Q415 averages.
Existing New Durable Goods Orders Claims
Home Sales Home Sales Ex Transportation Core Initial Cont
(Mn Units) (000s) (bn dollars) (000s) (Mn)
Mar na na na na 259 2.199
Feb 5.08 512 155.2 67.4 261 2.253
Jan 5.47 502 156.8 68.6 283 2.249
Q116-to-date 5.28 507 156.0 68.0 268 2.241
Q415 5.20 510 155.9 68.3 270 2.230
Next week's US economic data will not likely change the story of moderate growth -- with mixed evidence on inflation, as well.
a. Most evidence points to a 50+ print for March Mfg ISM. But, the Index would need to climb to 53+ to indicate real improvement.
b. The March ADP Estimate risks printing high for technical reasons, while March Payrolls risk printing low after the strong February Print (see my March 18th blog). Also, March Average Hourly Earnings should be modest, based on calendar considerations.
c. There is a risk the February Core PCE Deflator will show an increase in the y/y to 1.8% from 1.7% in January (consensus is 1.7%). But, timing issues with apparel prices likely would be responsible for the pickup (as well as for 0.1% pt of the 0.3% m/m). Yellen appeared to dismiss the high Core CPI prints on special factors, so a high Core PCE Deflator is probably not enough to move the Fed to hike.
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