Daily Insight
Group Economics Macro & Financial Markets Research
25 May 2016
The US data that matter for Fed officials Maritza Cabezas Senior Economist
•
Hawkish Fed officials remain “data dependent”…
Tel: +31 20 343 5618
•
… looking for positive signals in GDP growth, core PCE inflation and the jobs
maritza.cabezas@nl.abnamro.com
market •
US housing market shows improvement going into the second quarter
Hawkish Fed officials remain “data dependent”… Despite the more hawkish tone of Fed officials recently, they continue to insist that their decision to hike rates remains data dependent. Before the meeting of 14-15 June, a number of reports will be released. However, some incoming reports will be more important than others. Fed policymakers mentioned in the latest FOMC minutes that incoming data should be consistent with economic growth picking up, labour market conditions continuing to strengthen and the inflation outlook making progress toward the Committee’s 2% objective.
Fed officials looking for improvement labour market index
12
400
10
200 0
8
-200 -400
6 4
-600
2
-800 -1000
0 06
07
09
11
Non farm payrolls (lhs)
12
14
16
Unemployment (rhs)
Source: Thomson Reuters Datastream
… looking for positive signals in GDP growth, core inflation and the jobs market On 27 May, we are expecting a second reading of Q1 GDP growth. The first estimate showed that the economy was at a virtual standstill. GDP growth was 0.5% qoq annualised, down from 1.4% in 2015Q4. We expect the second reading to be upwardly revised to 0.9%. But it should remain weak, as the impact of low oil prices and a strong USD are still weighing on the economy. This data is still nothing to write home about though. Another important data release is the core PCE published on 31 May. This inflation measure has been subdued and has not changed in the past two months, remaining at 1.7%, still below the 2% target. The Fed is
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Daily Insight – The US data that matters for Fed officials– 25 May 2016
divided on the inflation front, some policymakers think that the Fed should allow a brief overshoot in US inflation, while others are simply looking for inflation to move in the direction of the inflation target. Meanwhile, the nonfarm payrolls to be released on 3 June will be closely watched since April’s data was somewhat on the weak side. On top of this, wage growth remains sluggish, so the Fed will want to see some clear signs of labour market tightening.
US housing market shows improvement going into the second quarter The most recent housing market data show signs of a modest improvement and are not a reason to hold the Fed back. Although most housing data is volatile, there has been some improvement in the past few months. The positive forward looking indicators include the latest loan survey, which suggests that in the first quarter banks eased lending standards on most types of residential mortgages. At the same time demand for these loan strengthened. Indeed the demand for housing, measured by existing home sales, was solid in April. New home sales, were also stronger than expected in April, with some upward revisions for prior months. The latest home price index released on Wednesday showed a modest increase in prices of 0.7% in March. We expect the housing market to show a steady, but modest improvement throughout the year. We think that employment, one of the drivers of housing demand, will show modest growth this year, as lower profit margins result in somewhat weaker labour demand.
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Daily Insight – The US data that matters for Fed officials - 25 May 2016
Day
Date
Time
Country
Key Economic Indicators and Events
Monday Monday Monday Monday Monday Monday Monday Monday
23/05/2016 23/05/2016 23/05/2016 23/05/2016 23/05/2016 23/05/2016 23/05/2016 23/05/2016
01:50 06:30 10:00 10:00 12:15 14:00 15:45
JP NL EC EC EC US US US
Merchandise trade exports - % yoy Consumer confidence - index Composite PMI output PMI services - index PMI manufacturing - index Fed's Bullard speaks in Beijing (v) Fed's Williams speaks in New York Markit - Flash PMI
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
24/05/2016 24/05/2016 24/05/2016 24/05/2016 24/05/2016 24/05/2016 24/05/2016
00:30 08:00 09:00 11:00 13:00 14:00 16:00
US DE EC DE TR HU US
Gfed's Harkker Speaks on Economic Outlook GDP - % qoq, final and details ECB's Praet speaks ZEW index (expectation economic growth) Repo rate - % Base rate -% New homes sold - % mom
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
25/05/2016 25/05/2016 25/05/2016 25/05/2016 25/05/2016 25/05/2016 25/05/2016
10:00 15:00 15:00 16:00 17:40 20:00
DE US US CA US US EC
Ifo - business climate - index FHFA house price index - % mom Fed's Harker speaks Policy rate - % Fed's Kashkari speaks on energy and Monetary Policy (nv) Fed's Kaplan speaks ECB's Praet and Knot speak in Madrid
Thursday Thursday Thursday Thursday Thursday
26/05/2016 26/05/2016 26/05/2016 26/05/2016 26/05/2016
10:30 11:15 14:30 16:00 18:00
GB US US US US
GDP - % qoq Fed's Bullard speaks (v) New durable goods orders - % mom Pending home sales - % mom Fed's Powell speaks about Economy (v)
Friday Friday Friday Friday
27/05/2016 27/05/2016 27/05/2016 27/05/2016
01:30 14:30 16:00 19:15
JP US US US
CPI - % yoy GDP - % qoq annualised Univ. of Michigan cons. confidence - index Yellen speaks at Harvard University at Radcliffe Day
Period
Latest outcome
Consensus
Apr May May P May P May P
-6.8 1 53.0 53.1 51.7
-10.4
May P
50.8
53.2 53.3 51.9
ABN AMRO
3 53.1 53.2 51.8
1Q F
0.7
0.7
May May 24 May 24 Apr
11.2 7.5 1.1 -1.5
12.2 7.5 0.9 1.6
13.0
May Mar
106.6 0.4
106.7 0.5
106.7 0.5
May 25
0.5
0.5
1Q P
0.4
Apr P Apr
1.3 1.4
0.2 0.7
0.8
Apr 1Q S May F
-0.1 0.5 95.8
-0.3 0.8 95.8
0.9 96.0
1.3
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events) FOMC (v) voting; (nv) non voting
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