The Business Week Ahead

What looks to be an upbeat week for economic news begins on Monday with the national activity index which is expected to offer a positive assessment of December's economy. Existing home sales will be released Wednesday with new home sales on Thursday and both are expected to show solid December strength and only limited giveback from outstanding strength in November. The deficit in December's goods trade is expected to narrow from November's outsized deficit while jobless claims are expected to move higher after dropping to a record low in the prior week. There will also be plenty of factory data starting with regional reports from Richmond and Kansas City, where strength for both is the consensus, and ending with the durable goods report on Friday where forecasters are calling for very solid results. The week's highlight is also saved for Friday and the first estimate on fourth-quarter GDP, a quarter when consumer spending is expected to have made the difference.

Monday

National Activity Index for December

Consensus Forecast: 0.25

Consensus Range: -0.15 to 0.36

The economy is solid based on the national activity index which firmed through the second half of 2017 and included a 0.15 gain in November. Retail sales are likely to be a positive in the December report with building permits neutral. The manufacturing component of the industrial production report is a likely weakness. The consensus for December's national activity index is 0.25.

Tuesday

Richmond Fed Manufacturing Index for January

Consensus Forecast: 18

Consensus Range: 17 to 21

The Richmond Fed manufacturing index has, like other regional manufacturing reports, been running at unusually high levels which made December's 10-point cooling to a still elevated 20 welcome news. Growth in new orders slowed by nearly 20 points in December to 16 and backlogs fell into contraction at minus 4. But shipments at 24 and employment at 20 both remained unusually strong and hint at the risk of overheating. The Econoday consensus for January's index is 18.

Wednesday

PMI Composite for January, Flash

Consensus Forecast: 54.0

Consensus Range: 53.2 to 54.5

PMI Manufacturing

Consensus Forecast: 55.0

Consensus Range: 53.7 to 55.5

PMI Services

Consensus Forecast: 54.0

Consensus Range: 53.1 to 54.8

Markit's set of U.S. indicators showed strength in December but reversed order with manufacturing pulling ahead and services, which had been consistently stronger, slowing noticeably. Still, the service sample did show strength in the last two weeks of December which points to momentum for January. The consensus for January is another solid showing, at 54.0 for the composite, also 54.0 for services, and 55.0 for manufacturing.

Existing Home Sales for December

Consensus Forecast, Annualized Rate: 5.750 million

Consensus Range: 5.500 to 5.900 million

Existing home sales had been lagging sharp acceleration in new home sales until the November report when sales jumped 5.6 percent to a 5.810 million annualized rate. November's rate was by far the strongest of the expansion with 5.700 million in March last year the next closest. But the sales surge drove down supply to only 3.4 months which means a lack of selection was likely to have slowed December sales. Still, a very solid 5.750 million rate is Econoday's consensus for December.

Thursday

International Trade In Goods for December

Consensus Forecast, Month-to-Month Change: -$68.9 billion

Consensus Range: -$69.5 to -$66.8 billion

The goods deficit in December is expected to narrow to a consensus $68.9 vs an unusually wide $70.0 billion in November ($69.7 billion initially reported). November's data actually pointed to very strong cross-border demand with goods exports rising a sharp 3.3 percent to $134.0 billion and imports, which however are a negative in the GDP calculation, up 3.0 percent to $204.0 billion. Also released with the report, and also GDP inputs, will be advance December data for wholesale inventories, where the build is seen at 0.3 percent, and retail inventories which are only expected to inch 0.1 percent higher.

Initial Jobless Claims for January 20 week

Consensus Forecast: 240,000

Consensus Range: 225,000 to 245,000

The steep 41,000 drop in initial claims during the January 13 week to 220,000, which was perhaps skewed lower by an unusual number of state estimates, is expected to be reversed in part during the January 20 week where the consensus is 240,000.

New Home Sales for December

Consensus Forecast, Annualized Rate: 683,000

Consensus Range:  635,000 to 710,000

The new home sales report is known for its volatility which was apparent in November as the annualized rate surged to 733,000 for a 17.5 percent monthly spike, the largest in 25 years. But rates in the two prior months, at 624,000 and 635,000, were also unusually strong and marked a pivot higher for the series. The consensus for new home sales in December is a very solid 683,000 rate.

Index of Leading Economic Indicators for December

Consensus Forecast, Month-to-Month Change: 0.5%

Consensus Range: 0.3% to 0.8%

After swinging sharply on hurricane effects in September and October, the index of leading economic indicators held steady at a healthy 0.4 percent pace in November. December's call, boosted by the stock market and ISM manufacturing orders, is a 0.5 percent gain.

Kansas City Manufacturing Index for January

Consensus Forecast: 14

Consensus Range: 11 to 16

New orders and backlogs both slowed in December but manufacturing production in the Kansas City Fed's region accelerated strongly. Capacity measures showed pressure with hiring very solid. The Econoday consensus for January's Kansas City manufacturing index is for steady strength at 14.

Friday

Durable Goods Orders for December

Consensus Forecast, Month-to-Month Change: 0.8%

Consensus Range: -1.0% to 1.5%

Durable Goods Orders, Ex-Transportation

Consensus Forecast: 0.6%

Consensus Range: -0.1% to 1.0%

Durable Goods Orders, Core Capital Goods (Nondefense Ex-Aircraft)

Consensus Forecast: 0.6%

Consensus Range: 0.0% to 0.7%

Durable goods orders are often bumpy but forecasters, despite a hard comparison with November's jump in aircraft orders, do not see a downswing in December. On the contrary, Econoday's consensus for durable goods orders is a 0.8 percent gain with ex-transportation seen up a solid 0.6 percent and core capital goods orders also seen up 0.6 percent.

Real GDP: 4th Quarter, 1st Estimate, Annualized Rate

Consensus Forecast: 2.9%

Consensus Range: 2.2% to 3.3%

Real Consumer Spending, Annualized Rate

Consensus Forecast: 3.6%

Consensus Range: 2.8% to 3.9%

GDP Price Index

Consensus Forecast: 2.3%

Consensus Range: 2.0% to 2.6%

The first estimate for fourth-quarter GDP is expected to come in at a 2.9 percent annualized rate vs 3.2 percent and 3.1 percent in the prior two quarters. Consumer spending is expected to be the driver in the fourth quarter, seen rising at a consensus gain of 3.6 percent which would compare with 2.2 percent in the third quarter and 3.3 percent in the second quarter. Residential spending is also expected to show strength in the fourth quarter with inventories seen as a negative. The call for the GDP price index is 2.3 percent.