First Estimate of Third Quarter GDP Headlines Week’s Releases

Oct 22, 2018
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Third Quarter GDP Headlines Economic Calendar

This week will be highlighted by the first estimate of third quarter GDP which is due on Friday and is expected to print a QoQ annualized gain of 3.2%. If the release is as expected it will mark an impressive back-to-back performance coming on the heels of the second quarter’s 4.2% gain. Meanwhile, in keeping with other inflation prints of late, Core PCE is expected to show inflation running at 2.1% and well within the 2% Fed benchmark. Other releases this week are mostly September data which is, or will be, incorporated in the GDP numbers but the new and pending home sales releases will be viewed with an eye towards any weakness in housing activity as a consequence of higher rates, higher housing prices and modest wage gains.


Treasuries

Treasuries

Short-Term Rates

Short-term Rates

Economic Calendar

Economic Calendar

 


Top Events of the Week Top 5 Events for the Week

OCT 22-26,  2018

1.  First Estimate of 3rd Quarter GDP — Friday
2.  Sept. New & Pending Home Sales — Wed./Thurs. 
3.  September Durable Goods — Thursday
4.  September Advance Goods Trade Balance — Thursday  
5. October Univ. of Mich. Sentiment — Friday
 

 

1.  First Estimate of Third Quarter GDP — Friday

The first estimate of third quarter GDP will be released Friday with the Bloomberg consensus estimate calling for a 3.2% print. The Atlanta Fed’s GDPNow model is expecting even better at 4.0%. The forecasted growth is expected to be driven by another solid showing by the consumer with personal consumption at 3.2% versus the robust 3.8% in the second quarter when GDP printed at 4.2%.  Back-to-back strong quarters will more than offset the weaker 2.2% first quarter growth while fourth quarter estimates are in the 2.8% area. That should put full-year 2018 GDP near 3.0% which compares closely to the Fed’s most recent 3.1% estimate for the year.

 

Annual US GDP

 

2.  September New & Pending Home Sales — Wednesday/Thursday

Recent housing-related releases have disappointed, or failed to convincingly beat expectations, and while not representing material drop-offs they continue to give the appearance that housing activity has plateaued with the combination of modest wage gains, home price appreciation, low inventories, and higher interest rates all conspiring to reduce housing affordability. Pending home sales are based on contract signings so they represent  a leading indicator to new and existing home sales  a month or two later when the contracts close. Sales for September are expected down -0.5% compared to –1.8% in August.  Meanwhile, new home sales for September are expected to inch up 0.2% versus the more robust 3.5% increase in August. In summary, the two series are expected to continue the recent trend of moderate activity but with no dramatic fall-off noted either.

 

3.  Preliminary September Durable Goods Orders — Thursday

While the headline durable goods orders number for September is expected be off versus a strong August ( -1.0% vs. 4.4%), ex the more volatile transportation sector the report should be up slightly versus the prior month (0.4% vs. 0.0%). Shipments of capital goods less air and defense (a measure of business investment) are expected to be down -0.2% same as the –0.2% decrease the prior month. If orders pan-out as expected, it will indicate some tempering of the robust August that was boosted by high-value aircraft orders. 

 

4.  September Advance Goods Trade Balance — Thursday

With trade war rhetoric a daily occurrence the monthly look at the goods trade deficit has become equal parts political and economic.  The goods trade deficit was -$64.9 billion in September 2017 and is expected to be –$74.2 billion in September 2018. The deficit began the quarter at  -$67.9 billion, so the expected widening to -$74.2 billion indicates the goods trade sector will subtract from third quarter GDP.

 

5.  October University of Michigan Consumer Sentiment — Friday

The final read on October consumer sentiment on Friday is expected to print at 98.6 compared to September’s 99.0.  The sentiment index has averaged 98.5 over the past year so a slightly below-trend reading but a solid result is expected nonetheless.  The survey also contains two inflation measures that are watched by the Fed. Consumers expect inflation over the next year to be 2.8% and the longer-run expectation (5-10 years) moderately lower at 2.3%. The near-term inflation expectation had been edging higher earlier in the year but is starting to trend lower matching the decreasing trend in the longer-run inflation expectation.

 

 

 


Technicals Investment Yield Ranges Over Last Year

 

US Treasuries

FHLB Agency Bullets

Mortgage Backed SecuritiesMunicipals

US Corporate - Financials

US Agency Swap Rates

 Source: Bloomberg

 

 

 


 

Tom Fitzgerald Signature

Thomas R. Fitzgerald

Director, Strategy & Research

Tfitzgerald@centerstatebank.com

 

 

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