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US economic indicators

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Durable goods orders (August): down markedly mainly due to transportation

Tue, Sep 23 2008, 09:38 GMT
by BHF-Bank Economics Department

BHF-Bank

• Existing and new home sales (August): another decline after temporary rebound

• UMI consumer sentiment (final September): increase somewhat smaller than initially announced

Existing home sales increased noticeably from 4.85m to 5.00m in July, after pending home sales had rebounded in the previous months. However, July pending home sales, which lead existing home sales by 1 to 2 months, went down by 3.2% mom. We thus expect existing home sales to have fallen back to 4.92m in August.

New home sales also rose in July, from a 17-year low of 0.503m to 0.515m. However, given the tightening of credit conditions, we forecast that new home sales will also have gone down slightly to 0.505m in August.

Durable goods orders increased by 1.3% mom in July, due to vehicle orders after the end of strike activities and to higher aircraft orders. However, Boeing’s orders fell by half in August, and vehicle orders may have declined sharply too, in line with production figures. We thus expect durable goods orders to have gone down by 2% mom. Given that the ISM new orders component has been showing contraction since December 2007, we also forecast that durable goods orders ex transportation will have fallen by about 0.5% mom.

Initial jobless claims rose by 10k to 455k in the week ending 13 September. The deterioration was due to hurricane damages rather than the weak economy. However, there will be more job losses in the financial industry. We thus expect jobless claims to have declined only slightly to 450k in the week ending 20 September, slightly above the latest 4-week moving average.

Q2 GDP was revised up substantially, from an annualised 1.9% to 3.3%. This was mainly due to an even bigger contribution from net exports and a smaller decline in inventories. The final results will probably more or less confirm the preliminary figures.

Consumer sentiment and gasoline prices

The University of Michigan’s (UMI) preliminary September consumer sentiment went up significantly by 10 points to 73.1. The rebound in expectations was particularly pronounced. As the graph indicates, the improvement appears to have been mainly due to the drop in gasoline prices, to which the UMI indicator usually reacts quite sensitively. However, given the intensification of the financial market turmoil, we forecast that UMI’s final September consumer sentiment will have been somewhat lower, at about 70.0.

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Published on  Tue, Sep 23 2008, 09:50 GMT