By Theresa Sheehan

PRINCETON (SMRA) – The economic data calendar will be fairly busy
over the course of the week ahead. The highlights are expected to be in
numbers related to the housing market and consumer confidence. While the
second estimate of first quarter GDP is set for release on Thursday —
and an upward revision is generally forecast. The second quarter is
already well-advanced and markets will be more concerned with more
recent numbers.

SIFMA has recommended an early close in the bond market on Friday
at 14:00 ET. Once the morning’s economic data is out of the way, the
three-day Memorial Day weekend will have essentially begun.

Economic Data

The second estimate of first quarter GDP is set for release at 8:30
ET on Thursday. The preliminary report placed growth at a disappointing
1.8%. However, upward revisions are expected due to higher consumer
spending. Nonetheless, the second quarter is almost 2/3 over, and this
data will be relatively old and of less immediate importance to markets
that some of the other reports during the week.

Personal income and spending for April at 8:30 ET on Friday should
show that incomes rose modestly, while spending was a bit higher in part
due to nondurables, which includes gasoline prices. The PCE deflator
will probably be consistent with another notch up in the rate of
inflation.

There are a number of indicators related to the housing market on
the week’s calendar. Data released so far this month suggests that the
spring season will be lackluster at best for sales and construction of
homes.

Sales of new single-family homes in April will be released at 10:00
ET on Tuesday. Plentiful supplies of less expensive existing homes will
sap demand for new construction at a time when consumers are being
cautious about homebuying.

Home values appear to be losing ground once again. The March
reports of the S&P/Case-Shiller Home Price Index at 9:00 ET on Tuesday
and FHFA House Price Index at 10:00 ET on Wednesday will probably
confirm the recent trend lower in home values. Against a backdrop of
potential losses in home value, it is difficult to persuade homebuyers
to commit to a purchase, and mortgage issuers to lend without
substantial downpayments and high credit scores.

The NAR’s Pending Home Sales Index for April at 10:00 ET on Friday
could show another incremental improvement. The index has been moving
unevenly higher since the start of the year, but is signaling only
modest growth at best for home sales.

The last monthly indexes for consumer confidence in May are on
Tuesday at 10:00 ET for the Conference Board’s Consumer Confidence
Index, and at 9:55 ET on Friday for the final reading of the
Reuters/University of Michigan Consumer Sentiment Index. The early May
reports suggest that consumers are somewhat more optimistic than they
were in April, but that may have deteriorated with the bad news about
natural disasters in the Midwest.

The report on durable goods orders in April at 8:30 ET on Thursday
covers a month in which new orders for aircraft plunged. A steep drop in
the transportation component is likely to pull the headline number down.

The manufacturing surveys from the Richmond Fed and Kansas City Fed
will provide a little more information about conditions in the factory
sector in May, adding to the already released numbers from the New York
and Philadelphia Fed Districts. Activity is likely to continue to expand
at a respectable pace, but somewhat more slowly than in April. The
Richmond report is at 10:00 ET on Tuesday, and the Kansas City release
is at 11:00 ET on Thursday.

Central Bank Activity and Federal Reserve Speakers

There are no routine monetary policy announcements scheduled for
the coming week.

The calendar of public speaking engagements for Fed policymakers
will thin out as the Memorial Day holiday approaches. Among the those
speakers scheduled earlier in the week, there should be little that will
alter from positions that were previously well articulated.

Treasury Auctions

The U.S. Treasury will announce no new coupon issues this week. New
2-, 5-, and 7-year notes on Thursday will be auctioned on Tuesday
through Thursday. All will settle on May 31.

The Treasury announced that the debt ceiling had been reached on
Monday, May 16. At the moment there is no impact on the amounts of the
bill or coupon offerings, but it is possible there may be eventually
as the Aug. 2 drop-dead date approaches.

** Stone & McCarthy Research Associates **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]