3 Numbers: U.S. Durable Goods Slips In Annual Terms, Despite March Rise

US economic data will dominate today’s news cycle, starting with the monthly report on durable goods orders for March. Later, we’ll see the flash data for the US Services PMI in April, followed by this month’s update of the Consumer Confidence Index.

US: Durable Goods Orders (1230 GMT) The outlook for manufacturing is still a mixed affair, but economists are looking for a round of good news in today’s hard data on durable goods orders for March.

Econoday.com’s consensus forecast sees a 1.6% increase in orders for last month compared with February -- an encouraging reversal after the previous 3.0% slide for the monthly comparison. A rebound is certainly welcome, but it may not mean much at this point. This volatile series is best viewed through a year-over-year lens, but by that standard the numbers point to a reversal of fortunes.

Headline orders have recently crawled back into positive territory for the annual change, posting a 1.7% gain in February vs the year-earlier level. The increase is the second consecutive advance and the fastest year-over-year growth in more than a year. But if today’s forecast for March holds, the implied annual pace is on track to slip into the red for the first time this year over year-earlier data.

A weak trend for orders isn’t terribly surprising in the wake of last week’s disappointing update on sentiment in the manufacturing sector for April. Markit’s purchasing managers’ index dipped to its lowest reading in more than six years. Although the PMI is still above the neutral 50 mark that separates growth from contraction, the recent slide suggests that the outlook for manufacturing is still mixed at best. Today's numbers may provide some relief, but a more convincing attitude adjustment on the plus side for manufacturing will have to wait.

US: Services PMI (1345 GMT) The nascent rebound in the services sector is expected to extend into today’s flash data for April.

Firmer data in sentiment will help fend off worries that a recession is stalking services, which is the foundation of US economic activity. For several months through February, a downtrend weighed on two sentiment benchmarks of the sector. Markit’s Services PMI, in fact, slipped below the neutral 50 mark before returning to a modestly positive reading in March.

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Note that the competing ISM Non-Manufacturing Index never went negative, although softer readings in this benchmark confirmed the downshift in the PMI data. But that may look like ancient history if today’s preliminary PMI estimate for April ticks higher again.

Nonetheless, there are still headwinds blowing in the US economy overall – headwinds that may yet play spoiler for services and beyond. This Friday’s “advance” GDP report for the first quarter is expected to highlight a softer trend. Growth in the first three months of this year is on track to stumble to a tepid 0.3% (seasonally adjusted annual rate), according to Atlanta Fed’s April 19 nowcast. If so, the US economy will post its slowest quarter gain in two years. But if today’s PMI update delivers encouraging news for April, the market may be tempted to look past a soft GDP release and consider the prospects for a rebound in the second quarter.

US: Consumer Confidence Index (1400 GMT) Another clue on the outlook for the second quarter arrives in today’s monthly report on the mood on Main Street. In contrast with the weak numbers in the competing data from the University of Michigan’s Consumer Sentiment Index (CSI), the Conference Board’s Consumer Confidence Index (CCI) has been relatively steady this year.

Today’s CCI update for April is projected to deliver another round of relative calm. Briefing.com’s consensus forecast sees the benchmark ticking up to 96.7 for this month’s reading – slightly above March’s 96.2. In other words, CCI is expected to remain within the relatively tight range that’s prevailed in recent months. If so, the news will be a modest counterpoint to CSI’s gently sliding data.

To be fair, the recent run of mild declines for CSI don’t look worrisome at this stage. “None of these declines indicate an impending recession, although concerns have risen about the resilience of consumers in the months ahead,” the director of the University of Michigan consumer survey said earlier this month.

But those concerns will continue to resonate – particularly if today’s release from the Conference Board is surprisingly weak. Ditto if today’s numbers that precede the CCI report show more deterioration in the US economy.