This week, the underlying theme for the economic indicators appears to be housing releases and manufacturing survey reports issued by the Federal Reserve banks of Chicago, Richmond, and Kansas City. These reports will prove to be important bellwethers ahead of next week’s FOMC meeting (to be held on April 29-30). The Conference Board’s Leading Economic Indicators Index (or LEI) will also release this week, which has historically predicted economic expansions and contractions in the overall economy. Besides, the industries and companies that have been most impacted by weather-related softness in the first quarter will be determined over the coming weeks, as companies report earnings for Q1 2014.
Housing releases this week include the FHFA Housing Price Index, Existing Home Sales (both on Tuesday) and New Home Sales (Wednesday). The weekly Mortgage Bankers Association Purchase Applications Index will release on Wednesday. This week will also see a number of consumer-centric releases like the weekly ICSC Goldman Sachs Same Store Sales report and the Johnson Redbook retail sales report that are due to release on Tuesday, April 22. The Bloomberg Consumer Comfort Index will release on Thursday, April 24.
Companies in consumer-centric sectors reporting earnings this week include Comcast (CMCSA), Kimberly-Clark (KMB), Safeway (SWY), and Starbucks Corporation (SBUX). Real estate investment trust Simon Property Group (SPG), which develops, owns, and manages high-end retail malls amongst other real estate investments, will also be reporting earnings on Tuesday, April 22. All five companies are part of the S&P 500 Index (IVV), which comprises the 500 largest companies in the U.S. by market capitalization.
Housing and manufacturing releases are important leading and coincident indicators respectively. Consumer spending, which makes up over two-thirds of the economy, will also impact future economic growth. So, this week will be important in order to assess whether the economy has shrugged off weather-related softness. Improving housing, manufacturing, and consumer spending indicators would indicate improvement in economic activity and GDP, all else equal. Economic growth usually implies rising interest rates, and in turn, falling bond prices, all else equal. Investors can invest in inverse bond funds like the ProShares Short 20+ Year Treasury Fund (TBF) and the Barclays iPath U.S. Treasury 10-Year Bear ETN (DTYS) to get the benefit from rising rates. Inverse bond ETFs provide the inverse return of the underlying benchmark index.
To read about the first indicator due for release this week, the Chicago Fed’s National Activity Index (or CFNAI), please move on to Part 2.