The Federal Reserve has taken a wait and see approach to monetary policy over the past few months. The FOMC will meet this week to discuss the lackluster state of the employment sector. There has been a distinct slowdown in this sector, as initial jobless claims have not improved for some time, while nonfarm payrolls failed to exceed expectations earlier in the month. However, the committee is not expected to take extreme action, since this negative trend has not persisted for long enough to require intervention.
The upcoming two-day meeting should provide crucial information regarding the central bank’s outlook on the economy, including the viewpoint regarding interest rates and the extent of tightening of monetary policy. Any information that could be extracted from these meetings is likely to impact markets significantly. The public release schedule for the FOMC this week will include the FOMC Statement and the Federal Funds rate on Wednesday. Later in the day, the FOMC will hold a press conference to discuss the findings of these meetings as well as the economic projections that have been composed as a result.
Mounting concerns over rising energy prices have been reduced of late, following a regression in the prices of gasoline that have recently reaped havoc across financial markets. Over the past few months, gasoline prices have climbed to record highs, reducing the level of consumers’ residual income. With fewer dollars remaining for the average consumer to spend on alternative goods and services, the pace of economic growth has certainly slowed. Therefore, the recent decline in energy prices has positively contributed to economic conditions.
Crude oil has dropped over the past few weeks, currently trading just above $104 per barrel. Retail sales in the US have consequently increased by 0.8%, while core retail sales saw an identical rise, as well. The positive sentiment sent equities upward, led by the Dow Jones Industrial index, which gained 1.40% to close at 13029.26. Additionally, the SP 500 finished the week up 0.60%. As consumers continue to spend and their sentiment toward the economy improves, economic growth stands to gain a great deal.
Economic data for the upcoming week is plentiful. Clearly, the FOMC meetings will take center stage. However, there are several important data releases that are sure to impact market conditions as well. Advance GDP is scheduled for a Friday release, and forecasts are indicative of a slowdown to 2.6%, following last month’s release at an already modest 3.0%.
Durable goods orders and core durable goods orders are both expected to regress as well, with forecasts of -1.3% and 0.6%, respectively. Conversely, the advance GDP price index shows an incline of 2.3%. Today, the CB consumer index will be announced, with forecasts indicative of a slight change to the 70.1 level. Meanwhile, new home sales are projected increase by 321K, showing some positive signs for the lackluster housing sector that has hindered growth since the beginning of the recession.
European data should provide some insight regarding the sentiment in the region. PMI figures are on deck