Economic reports will be of secondary interest to the markets this week, as investors try to sort through the implications of the historic events of the past few days. The attention will be on the markets themselves, the Federal Reserve and other central banks, and Washington lawmakers.
Fed Chairman Ben Bernanke will command center stage at least twice this week when he testifies before Congress, first on Wednesday before the Joint Economic Committee about the economic outlook, and then on Thursday with Treasury Secretary Henry Paulson in front of the House Financial Services Committee about the takeover of Fannie Mae and Freddie Mac. Bernanke and Paulson will offer insights into the Fed’s and Treasury’s thinking on the current market situation, how the events will affect the economy, and the rationale for the wave of government takeovers of financial institutions.
The overarching question right now for both investors and policymakers is how the latest upheaval will affect overall economic activity. Prior to recent events, the economy was already weakening relative to its buoyant performance in the second quarter. July reports on industrial production, consumer spending, housing starts, and employment all showed declines from June. Some of that weakness reflected tighter financial conditions, which have now become only tighter, as investors shun anything but the safest investments.
The Fed’s failure to cut interest rates at its Sept. 16 meeting implied policymakers felt their reductions in the target rate to date, to 2% from 5.25% last August, were sufficient to promote moderate growth. However, events may be overtaking the Fed’s forecast, especially given that the unemployment has shot up to 6.1% August, well above the Fed’s yearend expectation of 5.5% to 5.7%. Moreover, real consumer spending in the third quarter appears set to post its first quarterly decline since 1991. The Fed’s Sept. 16 statement elevated its concern over economic growth compared to its August assessment, which opens the door for a rate cut in coming weeks should the current market troubles further threaten the economy.
In the middle of the current market turmoil, economic reports on the previous month’s activity are pretty much old news. Nevertheless, the main focus of this week’s data will be on the sector most crucial to the outlook: housing. Sales of both new and existing homes have shown clear signs of bottoming in recent months, and August updates on both sectors will offer more guidance. Also, the Office of Federal Housing Enterprise Oversight (OFHEO) will publish its report on prices of existing homes in July. Prices continue to fall, but the overall drops have become smaller in recent months with the largest declines increasingly concentrated in the boom-bust areas of Califormia, Florida, Arizona, and Nevada.
Here's the weekly economic calendar from Action Economics.
Top Economic Reports
Reports
Date
Time
For
Median Estimate
Last Period
Existing Home Sales (millions)
Wednesday, Sept. 24
10:o0 a.m.
August
4.975
5.000
Durable Goods Orders ($Billions)
Thursday, Sept. 25
8:30 a.m.
August
-0.6%
1.3%
New Home Sales (millions)
Thursday, Sept. 25
10:00 a.m.
August
0.510
0.515
Q2 GDP (final)
Friday, Sept. 26
8:30 p.m.
Q2
3.3%
3.3%
Q2 Chain Price Index (final)
Friday, Sept. 26
8:30 a.m.
Q2
1.2%
1.2%
Consumer Price Index (final)
Friday, Sept. 26
9:55 a.m.
September
68.0
73.1