3 Numbers: U.S. Durable Goods Expected To Fall For Second Month
James Picerno | Jun 26, 2017 01:46AM ET
- Germany’s Ifo sentiment data on track to reaffirm the upbeat economic outlook
- New orders for US durable goods are projected to slide for a second month in May
- US recession risk in May expected to remain virtually nil in today’s US macro profile
Germany’s economy is in focus today with the release of the Ifo business sentiment survey data for June. Later, two US releases for May will provide fresh insight on the economy: new orders for durable goods and the Chicago Fed National Activity Index.
Germany: Ifo Business Climate Survey (0800 GMT): Europe’s biggest economy is expected to grow a bit faster than previously expected, according to the Ifo Institute. Will today’s update of sentiment in the German business sector from the institute align with a bullish forecast for economic activity?
Yes, according to TradingEconomics.com’s consensus forecasts. Although the numbers are expected to generally hold steady, either slipping or rising fractionally, the main takeaway is that the readings will remain at or near recent highs.
The Ifo index for the current situation, for instance, is expected to tick up to 123.3. If the forecast holds, this benchmark will edge up to a record high, based on data that begins in 1991.
Meanwhile, Ifo last week upgraded its macro forecast, explaining that “the upturn in the German economy that began in 2013 is growing broader and gaining impetus.” Today’s update of survey data looks set to show that businesses are on board with that forecast.
US: Durable Goods Orders (1230 GMT): Manufacturing activity has been slowing in recent months, and today’s hard data on new orders for durable goods isn’t likely to provide a reason to think otherwise.
Econoday.com’s consensus forecast sees orders slumping 0.4% in May, marking the second straight monthly slide. The implied one-year change, however, is expected to remain moderately positive, posting a 3.6% increase over the year-earlier level.
Sentiment readings for the manufacturing have been weakening this year too. The IHS Markit US Manufacturing PMI fell to an eight-month low last month, although the 52.7 print for the index in May is still above the neutral 50 mark that separates growth from contraction.
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“Manufacturing output, order books and employment all grew at only modest rates as sluggish sales prompted firms to scale back hiring,” the chief business economist at IHS Markit said earlier this month.
It’s too soon to know if the recent downshift in activity in the sector is noise or the start of deeper trouble. Perhaps today’s release will offer new clues that will clarify the outlook one way or the other.
US: Chicago Fed National Activity Index (1230 GMT): Manufacturing may be facing stronger headwinds at the moment, but the broad macro trend for the US still looks healthy.
Economists continue to project a solid rebound for second-quarter GDP after a weak rise in Q1. CNBC’s June 23 survey of Wall Street analysts calls for output rising 2.9% in Q2, a conspicuously faster gain vs. the sluggish 1.2% increase in the previous quarter.
Meanwhile, my analysis of the US business cycle last week continued to reflect low recession risk, based on data published through May. Today’s big-picture review from the Chicago Fed is on track to echo that profile.
Econoday.com’s consensus forecast calls for the monthly reading of the Chicago Fed National Activity Index to remain comfortably positive at 0.32 for May. Although that’s down from 0.49 in the previous month, it’s still a solid print that equates with robust growth.
Note, too, that the implied three-month forecast is on track to tick higher for a second month, rising to 0.29, a three-year high that's far above the minus 0.7 reading that signals the start of economic downturns.
Today’s release, in short, will likely confirm that US recession risk through May remained virtually nil.
Disclosure: Originally published at Saxo Bank TradingFloor.com
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