It would appear that the economy is progressing just as the Federal Reserve had expected. Economists at the central bank have forecast a deceleration in economic growth over the second half of the year. This week's release of third-quarter economic growth figures is expected to show an annualized rise of just 2.2%, vs. 2.6% in the second quarter. It would appear Fed Chairman Ben Bernanke can sit back and relax at this week's monetary policy meeting. Indeed, economists expect the Fed will keep rates at 5.25% through the remainder of the year.
However, other data coming out this week should reinforce recent signs that economic growth is picking up this quarter. There appears to be some early signs that housing is close to hitting bottom. Sales of new homes are expected to edge a little higher after a small gain in August. Builders have taken drastic measures to move homes and trim inventories. That's one reason the National Association of Home Builders' monthly survey rose for the first time all year. Residential construction will certainly weigh on economic growth this quarter, but the negative impact should be smaller than last quarter.
Housing and autos have affected manufacturing output lately, but order books continue to look strong. The September data are forecast to show some improvement in orders for durable goods. The October Philly Fed manufacturing survey revealed a rebound in the orders index and the New York Fed's survey showed orders were still rising at a solid, albeit slightly slower, pace.
Consumers are also feeling better than they had just a couple months ago. The final October consumer sentiment result is expected to show no reversal in the preliminary reading which registered a large gain. What's more, consumers appear to be taking the money saved from lower gasoline prices and spending it at stores. Weekly chain-store sales are pointing to a solid October.
A stronger fourth-quarter is unlikely to prompt any more moves by the Fed this year. But it would be a real sign that the economy is in better shape than previously thought.
Here's the weekly economic calendar, from Action Economics.