Vital Signs: Housing is Crucial for Recovery

On deck: Minutes of the Fed’s Mar. 18 policy meeting, the February trade deficit, March import prices, April consumer sentiment

The upcoming week is no goldmine of economic data, but it does offer a couple of key reports that will help to shape the debate over whether the economy is headed for a recession. Most private economists believe a downturn has already begun, and even Fed Chairman Ben Bernanke tried to cover all the bases when he testified before Congress on Apr. 2. His analysis: "It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly." That’s about as close as you will come to hearing Bernanke predict a recession.

As Bernanke told lawmakers, housing is at the center of both the economic and credit-market problems, and signs of improvement there are crucial to the timing of a recovery. On Tuesday, the report on pending sales of existing homes in February will offer further evidence on whether home demand is stabilizing. Data on pending sales tend to lead actual sales by a month or two. Actual sales of single-family homes rose in both January and February, amid some scant progress toward reducing the stock of unsold homes. Lower home prices and mortgage rates are starting to move the market: The National Association of Realtors Housing Affordability Index rose in February to its highest level in nearly five years.

One of the big offsets to housing’s drag on the economy has been improvement in foreign trade. On Thursday, the trade report for February will show the extent of trade’s support to economic growth in the first quarter. In the fourth quarter, a substantial narrowing in the trade deficit prevented growth in real gross domestic product from dipping below zero. The trade gap is on track to post a further narrowing in the first quarter, but not by as much in the previous quarter. Trade could once again be the difference between growth and contraction.

On the negative side of foreign trade, import prices continue to rise at a faster clip, and Friday’s data on import and export prices will update the trend. Crude oil and related fuels have been a key source of import-related inflation, but it’s not just oil. Prices of imported goods other than fuels in February were up 4.3% from a year ago, while they had risen at only a 2.5% pace during the previous year. Prices of imported autos, up 2.8%, are rising at the fastest clip since 1995, and the 2.1% growth rate of prices for consumer goods other than autos is the fastest since 1992.

Based on the expected performance of the coming week’s data imply that, the possibility of a recession will stay on the mind of Bernanke & Co., while inflation concerns will not be going away any time soon.

Here’s the weekly economic calendar, from Action Economics.

Top Reports for the coming week
Reports Date Time For Median Estimate Last Period
Consumer Credit (Bln$, monthly change) Monday, April 7 3:00 p.m. February 6.3 6.9
Wholesale Trade Sales Wednesday, April 9 10:00 a.m. March 0.4% 2.6%
International Trade Balance (Bln$) Thursday, April 10 8:30 a.m. February -58.0 -58.2
Exports, Goods and Services (Bln$) Thursday, April 10 8:30 a.m. February 148.6 148.2
Imports, Goods and Services (Bln$) Thursday, April 10 8:30 a.m. February 206.8 206.4
Treasury Budget Balance (Bln$) Thursday, April 10 2:00 p.m. March -95.0 -175.6
Import Price Index Friday, April 11 8:30 a.m. March 1.4% 0.2%
Export Price Index Friday, April 11 8:30 a.m. March 0.5% 0.9%
Consumer Sentiment Index, preliminary Friday, April 11 10:00 a.m. April 69.5 69.5
Other reports and events
Reports Date Time For
EARNINGS: Alcoa Monday, April 7  
SPEECH: San Fran. Fed President Yellen Monday, April 7 5:30 p.m.
SPEECH: Fed Vice Chairman Kohn Monday, April 7 5:30 p.m.
NFIB Survey (Small Business) Tuesday, April 8 7:30 a.m. March
Pending Home Sales Tuesday, April 8 10:00 a.m. February
Job Openings and Labor Turnover Survey Tuesday, April 8 10:00 a.m. February
Johnson Redbook Weekly Store Sales Tuesday, April 8 8:55 a.m. Mar. 30-Apr 5
ICSC-UBS Store Sales Tuesday, April 8 7:45 a.m. Mar. 30-Apr 5
FOMC Minutes (Mar. 18 meeting) Tuesday, April 8 2:00 p.m.
EARNINGS: Bed Bath & Beyond Wednesday, April 9  
SPEECH: Dallas Fed President Fisher Wednesday, April 9 1:30 p.m.
Mortgage Applications Wednesday, April 9 7:00 a.m. Mar. 30-Apr 5
Weekly Jobless Claims Thursday, April 10 8:30 a.m. Mar. 30-Apr 5
EARNINGS: General Electric Friday, April 11  
SPEECH: Dallas Fed President Fisher Friday, April 11 9:00 a.m.
Before it's here, it's on the Bloomberg Terminal.