The ISM Manufacturing Index is expected to decline to 50.9 in tomorrow’s update (May 1) for April vs. the previous month, based on The Capital Spectator’s median point forecast for several econometric estimates. The prediction is still above the neutral 50.0 mark and so the current outlook remains in a state of mild growth for this benchmark of economic activity in the US manufacturing sector.
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Consumer spending perked up last month while disposable personal income (DPI) stagnated in March, according to today’s monthly update from the US Bureau of Economic Analysis. Meanwhile, the Labor Department reports that initial jobless claims fell significantly more than expected last week, touching a 15-year low and thereby providing a bullish signal for next week’s monthly update on payrolls for April. From the vantage of today’s spending and income numbers, however, the first quarter ended with mixed results.
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The US economy slowed to a standstill in the first quarter, raising fresh questions about the macro outlook. But if the 0.2% gain in GDP in the first three months of this year is a reason to worry, the Federal Reserve prefers to emphasize the positive. The central bank labels the soft Q1 data as a victim of “transitory factors”. In yesterday’s FOMC statement the Fed advised that “although growth in output and employment slowed during the first quarter, the Committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace.”
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● Analysts Cut Q2 US GDP Forecasts After Weak Q1 Report | Bloomberg
● Fed Sees US Economy Accelerating After Slump in Q1 | Bloomberg
● US Pending Home Sales Climb To Nearly Two-Year High In March | RTT
● US oil hits 5-month high as dollar weakens | Reuters
● Euro zone ends deflation as price change rises to zero | Reuters
● Euro zone lending grows after three years in the red | Reuters
● German unemployment hits 24 year low in April | RTE
● German retail sales in March post biggest drop since Dec 2013 | Reuters
● Japan’s March industrial output falls, but still tops expectations | CNBC

The US economy expanded by a slim 0.2% in this year’s first quarter vs. the previous three-month period (seasonally adjusted real annual rate), the Bureau of Economic Analysis reports. The incremental gain is well below the consensus forecast (and The Capital Spectator’s median estimate). All of the major components in today’s release suffered, with one key exception: disposable personal income (DPI), which posted sharply higher growth in Q1 vs. last year’s Q4.
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Will the Federal Reserve drop new clues about the timing of the first interest rate hike in today’s policy statement at 2pm Eastern? Conventional wisdom suggests that the central bank will push out the date in the wake of sluggish economic data. “We think the statement’s downbeat growth description will reinforce the sense that a June liftoff remains a very long shot,” JPMorgan Chase economist Michael Feroli advised in a note to clients. Sounds reasonable, but it’s not obvious that Mr. Market’s fully on board with this outlook when we look at Treasury yields and the market’s implied inflation forecast.
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● Fed could give clues on first interest rate hike | USA Today
● US consumer confidence falls to year’s lowest level | LA Times
● Case-Shiller US 20-city home-price index up 0.5% in February | MarketWatch
● Richmond Fed: Mfg. in the central Atlantic region “remained soft in April” | BB
● UK GDP growth falls to slowest pace in three years | Telegraph
● Eurozone March M3 Growth Rises; Loans To Private Sector Recover | RTT

The US services sector in April continues to expand at a brisk pace as manufacturing stumbles. That’s the message in yesterday’s economic updates in context with recent numbers available for this month. The case for anticipating a second-quarter bounce back for the US economy, in other words, remains a bit challenged, based on the available data so far.
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● PMI: Strong US service sector growth maintained in April | Markit
● Dallas Fed Index: Texas manufacturing activity weakens again | DMN
● With economy uncertain, no Fed rate hike is seen before fall | AP
● 2% Inflation Target Is Questioned as Fed Policy Panel Prepares to Meet | NY Times
● UK recovery slows sharply in pre-election blow for Cameron | Reuters
● Greek finance minister Yanis Varoufakis replaced as leader of debt talks | Guardian
● Varoufakis sidelined but Greece still in danger | CNBC
● 3 Tough Choices for ECB on Greece | Bloomberg

Forecasters are in near-universal agreement that the government will report a slowdown in US economic growth in the “advance” GDP report for the first quarter that’s scheduled for release on Wednesday (Apr. 29). The only mystery is the degree of deceleration.
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