Capital Spending Check-up

May 27th Weekly Market Update

This week, financial markets will digest a series of key reports on the health of the United States’ economy in the second quarter, with reports due out on:

Business capital spending: Durable goods orders and shipments for April, the Richmond and Dallas Federal Reserve (Fed) Manufacturing Indices for May, and the Chicago Area Purchasing Managers’ Index for May.

Housing: Pending home sales for April and the Case-Shiller Home Price Index for March; and

Consumer spending: May consumer confidence measures from the Conference Board and the University of Michigan and personal income and spending for April.

The data released thus far for April and May all suggest that real gross domestic product (GDP) growth will accelerate to between 4% and 5% in the second quarter of 2014, after a weather-induced slowdown in growth in the first quarter of 2014. The data include:


Vehicle sales;

Initial claims for unemployment insurance;

– Institute for Supply Management (ISM) Indices;

Philadelphia and New York Fed Manufacturing Indices;

– Retail sales; and

– New and existing home sales.

Investors will get a look at the revised figures for first quarter GDP this week as well. The data released for February and March 2014 since the first quarter GDP data were first reported in late April 2014 suggest that, upon revision, first quarter GDP could turn negative. As we noted in last week’s Weekly Economic Commentary: Snapback, we do not think the economic weakness in the first quarter is the start of another recession, and, indeed, we continue to expect real GDP will expand 3.0% in all of 2014.

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