Europe will have to share the stage this coming week with some key US data points. On Thursday, we get the ?Second Estimate? for first quarter GDP. Growth is expected to be revised down to 1.9% (from 2.2% in the initial estimate), incorporating weaker inventory accumulation but also stronger final sales. On Friday, the May employment report is expected to show that the economy added 165,000 jobs that month, better than in April and more reflective of underlying conditions.
The unemployment rate should hold steady at 8.1%. Also due Friday is a report on April personal spending and incomes. Spending growth likely picked up last month while income growth sagged, suggesting that households dipped into their savings.
In other news, the Case-Shiller Home Price Index likely posted a small gain in March, helping to improve year/year comparisons. The ISM Manufacturing Index is expected to show some slowing in the manufacturing expansion in May, while motor vehicle sales probably softened that month.
Tuesday, May 29 ? S&P/Case-Shiller Home Price Index (Mar.)
The 20-city composite year-on-year growth rate will narrow by more than a percentage point, mainly because a steep month-on-month decline in March 2011 is dropping out of the calculation. This result incorporates a small monthly increase in the seasonally-adjusted series. But unlike other home prices series that are showing stabilization, we expect further declines in the Case-Shilller index in the coming months owing to the larger presence of distressed properties in this measure.
Tuesday, May 29 ? Conference Board Consumer Confidence (May)
The Conference Board's Consumer Confidence Index likely increased in May after two back-to-back declines. Pump prices have been falling since early April, helping improve the consumer mood despite a volatile stock market and less-than-stellar job prospects.
Thursday, May 30 ? Real Gross Domestic Product (Second Estimate, Q1)
We expect first-quarter GDP growth to be revised down to 1.9% from 2.2%. The silver lining is that the revision should be more than accounted for by lower inventory accumulation. Leaner inventories are a plus for future growth prospects. Final sales, which exclude inventories, should be revised upwards, led by business equipment and software spending.
Friday, June 1? Employment Report (May)
We expect payrolls to rise by 165,000 in May, which would beat April's 115,000 increase. We think that April understated the improvement in the labor market, just as the average 252,000 monthly payroll gains in December through February overstated it. In addition to being hit by a payback after the mild winter, April may also have been hurt by the timing of holidays. We see May private payrolls rising 175,000, and government payrolls declining 10,000. We expect the unemployment rate to hold steady at 8.1%.
Friday, June 1 ? Personal Income, Consumption, and Inflation (Apr.)
Personal income growth likely slowed to a 0.2% pace, the weakest since November. Spending growth, meanwhile, likely outpaced income growth, meaning households dipped into their savings in April. Personal spending adjusted for inflation is likely to come in at a solid 0.3%, after a weak 0.1% increase in March. Core inflation likely held to its 0.2% trend pace.
Friday, June 1 ? Construction Spending (Apr.)
We are expecting a small dip in construction spending for April, with a decline in public construction offsetting an increase in private residential construction. There is a better-than-even chance that the numbers for the prior three months will be revised up, since housing starts, on which the residential spending numbers are based, were revised up. Spending excluding improvements was likely also down 0.2%.
Friday, June 1 ? ISM Manufacturing Index (May)
The manufacturing sector has turned softer recently, with weaker gains and sogginess in orders. Thus the ISM Manufacturing Index should fall back towards a mediocre 53.0. The April production reading of 61 is the single largest source of weakness in the composite as it is far stronger than any of the other index components. The Empire State Index firmed a shade, but the Philadelphia Fed Index and Richmond Fed Index readings lost ground.
Friday, June 1 ? Motor Vehicle Sales (May)
Although a bit softer than the April results, US sales are expected to remain above the 14.0 million-unit rate in May. Some payback from the strong start to the year is anticipated, but a strong push by automakers over the Memorial Day weekend could support May sales.
