Last week’s economic updates came in a bit worse than expected, as housing sales failed to meet expectations and businesses cut down on headline investments. This week is a short one with the Memorial Day holiday, but we still have several important data releases.
On Tuesday, April’s existing home sales report was released. Sales were expected to rise by 2.7 percent, in part to offset the 4.9 percent decline in March. But actual sales fell by 0.4 percent in April. This marks the 14th straight month of year-over-year declines in existing home sales, which signals a slowdown in the broader housing market.
On Wednesday, the minutes from the May 1 meeting of the Federal Open Market Committee were released. There were no major surprises here, as the committee did not change interest rates at the last meeting and inflation metrics have moved below the committee’s 2 percent target. The minutes did indicate that Fed members appear willing to take a wait-and-see approach with setting rates, at least for the time being.
On Thursday, housing continued to disappoint. April’s new home sales fell by 6.9 percent against expectations for a more modest decline of 2.5 percent. Here, the picture is slightly better than existing home sales, as new home sales grew by 8.1 percent in March. Although economists were hoping that the March bump may have been a turning point for sales, these disappointing results show that the housing market still has a long way to go to reach last year’s levels.
Finally, on Friday, April’s durable goods orders report was released. Here again, the data disappointed. Headline orders declined by 2.1 percent during the month. Much of this decline was due to a drop in aircraft orders, which can be notoriously volatile on a monthly basis. The core durable goods figure, which strips out transportation orders, remained flat. Overall, business investment has been steady, if not spectacular, so this headline drop in April is nothing to worry about.
On Tuesday, the Conference Board Consumer Confidence Index came in better than expected. It jumped from 129.2 to 134.1, against expectations for a modest increase to 130. This larger-than-expected increase is consistent with the recent 15-year high we saw in the University of Michigan consumer confidence survey. As such, this was a positive signal for the economy.
On Thursday, we get the second estimate of economic growth in the first quarter of 2019. It is expected to come in at 3.1 percent, slightly below the initial 3.2 percent estimate. More interesting will be whether the composition of growth changes significantly to a more sustainable mix. If the number comes in as expected, it will confirm a surprisingly strong result.
On Friday, we will see the personal income and spending report. Income growth is expected to show an acceleration from 0.1 percent in March to 0.2 percent for April. There will likely be a decrease in spending growth, from 0.9 percent in March to a more sustainable 0.2 percent for April, on a decline in auto sales and utility spending due to mild weather. If the numbers come in as expected, they would indicate continued sustainable growth consistent with strong consumer confidence, which would be positive.
That’s it for this week. Thanks for reading!