First Quarter GDP & March Housing Sales Top Releases This Week

Apr 23, 2018
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First Quarter GDP & Housing  Sales Top Releases This Week

The first look at first quarter GDP headlines the list of releases this week, but that report won’t come until Friday. As has been the case for much of this expansion, first quarter estimates are for GDP to print a somewhat disappointing 2.0%. Most analysts think there are some residual seasonality issues not being accounted for correctly as every first quarter going back for several years has often been the weakest print of the year. This year that trend is expected to continue as early estimates for the second quarter are for GDP to once again rebound to a stronger 3.1% annualized growth. Before GDP we’ll get a good look at the housing market for March with existing sales (today) and new home sales (Tuesday).  Both are expected to print at or better than February.


Treasuries

Treasuries

Short-Term Rates

Short-term Rates

Economic Calendar

Economic Calendar

 


Top Events of the Week Top 5 Events for the Week

APRIL 23–27,  2018

1.  First Quarter GDP — Friday
2.  March Existing & New Home Sales — Mon./Tues.
3.  March Durable Goods Orders — Thursday
4.  March Advance Goods Trade Balance — Wednesday
5.  D.C. Developments — All Week

 

 

1.  First Quarter GDP –Friday

The first estimate of first quarter GDP will be released Friday with the Bloomberg consensus estimate calling for a 2.0% print. The Atlanta Fed’s GDPNow model is nearby at 1.97%. The decrease in growth compared to recent quarters is expected to be driven by a softening in consumer spending with personal consumption expected to be 1.2% versus 4.0% in the fourth quarter when GDP printed at 2.9%.  First quarter softness has been a hallmark of this expansion with bounces in the following quarters leading many to conclude seasonal factors are being missed.  Second quarter estimates are calling for another rebound this year with a 3.1% forecast.

 

2.  Existing  & New Home Sales for March —Monday/Tuesday

The housing market has had some mixed releases lately, with some slowing sales that have been attributed to a lack of supply as well as rising mortgage rates, but data this week may reverse those trends. Existing home sales account for nearly 90% of the market and give us the broadest view of market health but with data based on closings it can be a bit dated versus new and pending home sales which are based on contract signings. For March, existing home sales are projected to increase 0.2% to 5.55 million annualized versus 5.54 million in February. New home sales for March are expected to increase 1.9% to 630 thousand units annualized versus 618 thousand the prior month.

 

Existing and New Home Sales

 

3.  Preliminary Durable Goods Orders for March — Thursday

Across-the-board, durable goods orders and shipments for March are expected to be off slightly versus a strong February. The headline orders number is expected to increase 1.5% versus 3.0% in February. Orders ex the volatile transportation sector are forecast to increase 0.4% versus 1.0% the prior month. Shipments of capital goods less air and defense (a measure of business investment) are expected to be up 0.3% versus a 1.4% decrease the prior month. 

 

4.  Advance Goods Trade Balance for March—Wednesday

Despite the dollar weakening over the past year the trade balance deficit hasn’t improved.  The goods trade deficit was -$64.9 billion in March 2017 and is expected to be –$75.0 billion for March 2018, despite an11% drop in the dollar during that time. That drop should have boosted exports via cheaper product prices and narrowed the trade deficit, all other things equal. What it does signal is that while foreign economies have strengthened over the past year, the U.S. economy continues to outpace that strength, thus a continued widening in the trade deficit. The deficit began the quarter at  -$72.3 billion, so the expected quarter-end widening indicates the sector will be a drag on first quarter GDP.

 

5.  D.C. Happenings—All Week  

With the Fed going into a self-imposed quiet period before the May 2 FOMC meeting, any  news from D.C. will have to come from the Trump administration and/or Congress. Luckily for us, both entities are very good at producing headlines that can have market moving consequences. On  Capitol Hill its likely we’ll finally see some movement on the Dodd-Frank reform bill that passed the Senate weeks ago but has stalled in the House as some of the more conservative members push for deeper cuts to Dodd-Frank requirements. We expect the final legislation to hue closely to the Senate version lest some Democratic senators balk at the changes throwing the whole measure into question. 

 

 

 


Technicals Investment Yield Ranges Over Last Year

 

US Treasuries

FHLB Agency Bullets

Mortgage Backed Securities 

Municipals

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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