Vital Signs: Housing Holds a Key to Spending

The next report to watch is housing starts. Also on tap: durable goods orders, home builders survey, and leading economic indicators index

The economy is slowing considerably in the second quarter. Consumers are still trekking out to malls and restaurants, but the high price of gasoline and jitters about the housing market are causing them to spend less. Because consumers have been an engine of growth for so long, any signs of weakness in consumer spending raises concerns about the health of the economy.

Despite a relatively light schedule of economic data, there are a couple of reports that will command investors' attention. The most important report will be May housing starts. Home builders are shifting gears in a hurry to adjust to slower demand for new homes. Even so, new homes available for sale are still climbing. This trend is why the Housing Market Index from the National Association of Home Builders, which comes out on June 19, has tanked in recent months.

The May durable goods data also bears watching. Industrial production was soft in May, and April factory orders were weak. The durable goods data will shed some light on whether manufacturing activity is also beginning to soften or if business investment can offset any slowdown for consumer durable goods.

None of the reports coming out this week should have any material affect on the Federal Reserve's monetary policy decision at its June 28-29 meeting. But from here on, economy watchers will examine the numbers with the Fed's Aug. 8 monetary policy meeting in mind.

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