NAM: Monday Economic Report
After a partial government shutdown that lasted five weeks, there will likely be a new schedule for economic releases given the backlog of data that have been delayed. For instance, new data on durable goods orders and shipments, GDP growth by industry and new home sales were not released on schedule last week.
Assuming it is released on schedule, new GDP data for the fourth quarter are slated to come out on January 30. I estimate that the U.S. economy grew 2.6 percent in the fourth quarter, with 2.9 percent growth for 2018.
On the manufacturing front, regional data suggest that manufacturing activity continues to soften. In the Kansas City Federal Reserve Bank’s district, slowing new orders and employment brought the composite index to the lowest level since November 2016. At the same time, manufacturers reported contracting activity in the Richmond Federal Reserve’s region for the second straight month. Despite that news, survey respondents in both regions remained positive about the next six months.
The weaker data in the manufacturing sector likely reflects decelerating—not declining—growth, at least for now. The December manufacturing productiondata, which were highlighted in last week’s report, noted that the sector remains a bright spot, and the IHS Markit Flash U.S. Manufacturing PMI data for January continue to report modest growth overall. With that said, weaknesses in the data exist, especially abroad, as seen in the survey last week on Eurozone manufacturing activity.
There also continues to be disappointing news on the housing front. Existing home sales fell to the lowest level since November 2015 in December, with mortgage rates and consumer anxieties dampening demand for the month.
What to look for this week:
The Federal Open Market Committee will meet, but participants are not likely to raise interest rates. Look for some clues about future hikes, with many analysts predicting that the Federal Reserve will pause on moves as it awaits signs of strength in the economic data.
At the end of the week, jobs data will be released, likely negatively impacted by the partial government shutdown.
Editor’s Note:I am excited to announce that Nicolas Clerc, the chief economist at Caterpillar, will be the guest author for the Monday Economic Report on February 4. This will give us an opportunity to gain insights from a well-respected industrial economist with on-the-ground expertise in the sector.