As expected, new home sales rose by 30k in March, from a revised 270k to 300k. But this was still almost 22% below the previous year’s level. New home sales have been fluctuating around 300k since May 2010. Given the pickup in employment they could have gone up again in April to about 320k.

March durable goods orders surged by 4.1% mom. This was mainly due to rising orders for aircraft and vehicles, but at 2.3%, the increase ex transportation was also marked. According to Boeing data, aircraft orders plunged in April, but as the last durable goods orders report had only partly reflected the March surge in Boeing orders, aircraft could have had a positive impact again in April. However, vehicle orders, which went up almost 6% mom in March, could have declined, just like car production. Thus durable goods orders will probably have fallen by about 1.5% mom in April. Given that the ISM new orders component remained elevated at 61.7, durable goods orders ex transportation might have remained at least unchanged.

The first estimate for GDP in Q1 showed that the quarterly growth rate slowed from 3.1% to 1.8%. This was partly due to unfavourable weather conditions. Moreover, government consumption expenditures delivered the biggest negative contribution, as national defence outlays and state and local governments’ expenditures dropped sharply. There were some surprises in the data: the negative contribution of net exports was modest, whereas monthly trade figures had suggested a sharp deterioration in the real deficit.

On the other hand, the positive contribution of business inventories was smaller than expected. Investment demand only went up slightly, but private consumption performed quite favourably. And according to the upward revision of March retail sales, private consumption might well have contributed even more to growth. We therefore predict that the second estimate for GDP in Q1 will show a growth rate of 2.2% qoq rather than 1.8% qoq. However, a downward revision of net exports cannot be ruled out.

Initial jobless claims declined by 29k to 409k in the week ending 14 May. Despite the drop, this is the sixth consecutive week that claims have been above the 400k mark, the point at which economists have in the past concluded that more jobs were being lost than created. However, the current elevated level is unlikely to reflect a permanent deterioration in labour market conditions. It is rather the result of several temporary factors, such as problems connected with interruptions in the supply chain after the Japanese disaster and the floods in the Mississippi area. We expect jobless claims to have fallen further in the week ending 21 May, albeit only slightly, to about 400k.

Given that both aggregate working hours and average hourly earnings increased in April, personal income could have gone up by 0.4% mom. Nominal personal spending might have gone up by about 0.5% mom in April. We already know that retail sales were 0.5% higher, but a large part of the increase was due to higher gasoline prices.

We expect the PCE core deflator to have risen by 0.2% mom in April, just like core CPI. The annual rate would thus have reached 1% for the first time since September 2010. In its latest projection, the FOMC is expecting the PCE core deflator to rise to 1.3 – 1.6% in Q4 (yoy).

The University of Michigan’s (UMI) preliminary May consumer sentiment increased 2.6 points to 72.4, although the current assessment fell to its lowest level since October. However, expectations went up noticeably for the second month in a row, albeit still remaining lower than in the previous year. As the upward trend in gasoline prices seems to have halted, they will not have had a negative impact on the current assessment this time. However, the weekly Bloomberg consumer comfort poll continued to deteriorate markedly. Thus UMI’s final May consumer sentiment might fall to about 72.0 or even lower.

After having risen by almost 6% in the previous two months, pending home sales could have fallen by 1.0% mom in April.

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