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The Week Ahead

Existing Home Sales, CC, FS, Durable Goods Orders, and Gross Domestic Product

Mon, Jan 25 2010, 06:51 GMT
by BBVA Bancomer Team

BBVA Bancomer  |  View company's profile

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Existing Home Sales (December, Monday 10:00 ET)

Forecast: 5.75M Consensus: 5.90M Previous: 6.54M

Existing home sales are expected to drop in December, as indicated by the 16% decline in pending home sales. The strong growth in home sales in the previous three months was inflated by buyers rushing to close the deals before the original November 31 expiration date of the home buyers’ tax credit. December’s decline will represent a downward adjustment due to the absence of this effect. Nevertheless, market conditions continue to favor the buyer as home prices and mortgage rates are low and affordability levels are high. These conditions will help to support home sales moving forward.

Consumer Confidence (January, Tuesday 10:00 ET)

Forecast: 54.0 Consensus: 53.5 Previous: 52.9

Consumer confidence is expected to rise for the third consecutive month, which will help to sustain the recent pick-up in consumer spending. Some positive signs from the labor market, such as the slow in job losses and the addition of jobs to select services sectors, will boost confidence. Nevertheless, the Beige Book reported that businesses intend to remain conservative in their hiring practices, indicating that confidence will rise at a slow pace moving forward.

FOMC Statement (Wednesday 2:00 ET)

Forecast: 0%-0.25% Consensus: 0%-0.25% Previous: 0%-0.25%

The FOMC is not expected to make any significant changes to their statement. Given that economic slack is still prevalent and inflationary pressures remain balanced, the committee will hold the target interest rate at 0%-0.25%.

Durable Goods Orders (December, Thursday 8:30 ET)

Forecast: 2.0% Consensus: 2.0% Previous: 0.2%

Durable goods orders are expected to rise for the second month in a row in December, further supporting the expansion of the manufacturing industry and industrial production. Moreover, orders of capital goods excluding aircraft and parts are expected to increase, supporting our forecast of a second quarterly rise in non-residential investment in equipment & software.

Gross Domestic Product (Advanced) (4Q09, Friday 8:30 ET)

Forecast: 4.2% Consensus: 4.6% Previous: 2.2%

The economy is expected to expand at a faster pace in 4Q09 than in 3Q09. GDP will receive a significant boost from inventories as businesses began to restock after six quarters of steep declines. Furthermore, consumption will contribute to growth, but it will expand at a slower pace than in the previous quarter. The decline in non-residential investment will slow further as investment in equipment and software offsets the slowing expenditures on structures. On the other hand, after rising in 3Q09, residential investment will decline as indicated by a slow in housing starts and construction spending. Lastly, the expansion of imports is outpacing that of exports, which will result in a negative contribution to GDP.

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Published on  Mon, Jan 25 2010, 06:59 GMT

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