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The week ahead is holiday shortened by Presidents Day on Monday. While lighter in terms of releases, a few key data points could provide investors with insights as to the strength of the housing market tailwinds as well as the manufacturing recovery.
The first release of the week will be the Empire State Manufacturing Survey for February with consensus estimates pointing to an index level of 5.
The survey, which is conducted by the Federal Reserve Bank of New York, summarizes the general business conditions faced by manufacturers in the state of New York.
January had seen the headline index rise to 4.8 from the December low of 3.3. The global manufacturing industry is starting to show signs of recovery, and the easing of the trade war with China should lend further support.
The ISM manufacturing index is back in the expansionary territory, but the coronavirus outbreak brings new uncertainty to the nascent recovery.
Releasing next will be the producer price index for January. Producer prices in December had ticked up 0.1% after having fallen flat the previous month. Analysts expect the January figures to also go up by 0.1%.
Housing starts for January will be releasing on Wednesday. The figures for December had skyrocketed to a 13-year high of 1.61 million as the housing markets benefited from the low mortgage rates, strong labor market and robust consumers.
The unseasonably mild weather also supported activity in December, as builders increased construction to take advantage of the housing short supply faced by buyers.
Housing permits, which are considered a leading indicator of homebuilding activity, declined in December. In line with that view, the consensus estimates for January housing starts stands at a seasonally adjusted figure of about 1.4 million.
Friday will bring in more data pertaining to the manufacturing and service sectors.
The Markit U.S. manufacturing purchasing managers index had declined in January to 51.9 (from 52.8 in December) due to demand softening and highlighted some of the ongoing issues faced by manufacturers despite signs of a recovery.
Also releasing on the same date will be the Markit U.S. service sector purchasing managers index, which is expected to improve to 54.4 versus January’s 53.4.
Robust household spending has been fueling the service sector, and we expect this trend to continue in the near future.
The week will end with the release of the figures for existing home sales in January. December had seen a solid increase in sales of previously owned homes to a seasonally adjusted annual rate of 5.54 million.
The supply of existing homes has, however, been tight, and the expectation is for the January numbers to be slightly lower at 5.43 million.