NEWS / Foreign Exchange

Consumer Confidence, Home Sales, Gross Domestic Product, Employment Cost Index

Consumer Confidence (April)

Actual: 104.0 Consensus: 105.0 Prior: 108.2

The Conference Board Consumer Confidence Index declined for the second consecutive month as higher gasoline prices dampened consumers??™ assessments on present and future conditions. The Present Situation Index fell to 131.3 from 138.5 in March; the first decline in six months. The share of respondents claiming conditions are ???good??? fell to 26.5% from 28.6%. Those saying conditions are bad rose to 15% from 14.5%. The share of respondents claiming jobs are ???hard to get??? edge up to 20.4% from 18.9%, while those saying jobs are ???plentiful??? slipped to 27.8% from 30.3%. The Expectations Index declined for the fourth consecutive month, standing at 85.8 in April from 87.9 in Marc. Those expecting business conditions to worsen rose to 10.2% from 9.8% while those anticipating business conditions to improve fell to 13.5% from 14.5%. Expectations on the labor market did not change significantly. Those expecting fewer jobs in the next six months slipped to 15.7% from 16%, while those anticipating more jobs increased to 17% from 18% in March.

New & Existing Home Sales (March)

Actual: 6.12M, 858K Consensus: 6.45M, 890K Prior: 6.68M, 836K

Home sales disappointed in March. Sales of previously-owned homes plunged 8.4% to a seasonally adjusted annual rate of 6.12 million units in March from a pace of 6.68 million in February. On the other side, new home sales rose 2.6% to a seasonally adjusted annual rate of 858K from 836K in February. The increase was not enough to compensate for the strong losses of previous months. Two reasons can be argued to explain sales??™ performance. On first place, bad weather conditions in February discouraged home shopping reducing the number of sales that close in March. Second, prospective buyers are suddenly confronting tighten lending standards, particularly in the sub-prime sector.

Gross Domestic Product, Advanced (Q107)

Actual: 1.3% Consensus: 1.8% Prior: 2.5%

Real GDP rose by a seasonally adjusted annual rate of 1.3% in Q107, 2.1% when compared to the level of Q106, the lowest year-over-year rate sinceQ203. Consumer spending was strong increasing 3.8% after a 4.2 in Q406. Over the last four quarters, real PCE has grown at a 3.4% pace, matching the growth of the previous four quarters. The housing downturn remained as the main drag to GDP growth. Residential investment fell 17% and removed 1.0 pp to GDP growth. It will continue subtracting to GDP growth in the next two quarters as builders work down inventories to more sustainable levels. Trade took off 0.5 pp to GDP growth as exports declined 1.2% and imports increased 2.3%. Business investment was weak in the first quarter. Growing by a modest 2.0%, nonresidential investment rebounded from the 3.1% slump of Q406. Business investment would accelerate from Q207 onwards.

Employment Cost Index (Q107)

Actual: 0.8% Consensus: 0.9% Prior: 0.9%

Compensations for civilian workers increased 0.8% in Q107 from the previous quarter. This was 3.5% more when compared to the level of a year earlier; the highest year-over-year rate since Q105. While growth in wages and salaries accelerated, increases in benefits decelerated boosted by a slowdown in private industry. Pressures from labor compensations remained worrisome for the inflation prospects. However, we expect them to recede as economic activity slows and generates some slack in the labor market.