Fundamental Weekly Explanation: GDP, PCE, Durable Goods Orders, UoM Inflation Expectations
Existing home sales likely rose a solid 4.4% to 5.26 million units in May. May existing home sales are expected to post a solid 4.4% gain to 5.26 million units, more than reversing the April dip.
Durable goods orders likely slipped 0.2% in May while ex-transportation orders likely rose 0.6%. Durable goods orders to be expected fall 0.2% while ex-transportation orders likely bounced back with a 0.6% increase. Looking for a rebound in core capital goods orders to support a bounce back in Q2 business equipment spending.
May new home sales are expected to rise 1.1% to a 523K unit annual rate. New home sales likely saw continued growth in May, rising 1.1% to 523K units.
In its third and final release, Q1 GDP growth likely saw an upward revision to -0.1% from -0.7%. The quarterly services survey came in higher than BEA
assumptions, notably for spending on physician services, and March core
retail sales were revised higher.
The May headline PCE price index likely rose 0.4% on the month with the core index rising 0.1%. Annual PCE inflation likely firmed to 0.2% YoY while core inflation was stable at 1.2% YoY. The May headline PCE price index likely rose 0.4% on the month while the core index is expected to rise 0.1%. Looking ahead, we expect core PCE inflation to bottom out at +1.2% YoY in Q2 and slowly accelerate towards the FOMC 2% target this year through 2017. Given the unchanged Q4/Q4 2015 FOMC projection range of 1.3%-1.4% in the June Summary of Economic Projections, this is likely the Fed’s scenario as well.
Personal nominal income likely rose 0.5% in May while spending likely picked up with a 0.6% increase. May nominal income likely rose 0.5%, slightly firmer than the 0.4% increase in April. Our 0.6% projected rise in May nominal PCE supports a firm acceleration in Q2 consumer spending to a 2.8% pace.
The final University of Michigan (UofM) consumer sentiment index likely confirmed a rebound in June to 94.6 from 90.7 in May. As economic activity and labor markets continue to recover from the soft patch in the first quarter, we expect consumer spirits to move higher, supporting stronger household spending. Finally, short- and long-term inflation expectations will be noted, as both measures slipped to 2.7% in the preliminary report.
