It’s May, and the sunny daffodils are setting the mood. Things also are looking brighter for the economy, which is coming off a mild bout of springtime flu. Pessimists were quick to declare the expansion was losing its youthful zest, as auto and home sales faltered. But this week’s heavy schedule of indicators should lay such fears to rest. The key test occurs Friday, with the employment report for April. Chicago economist Joan Schneider is looking for the jobless rate to fall to 5.4 percent, from 5.5 percent in March. Additionally, she expects payrolls to grow by 200,000 jobs. Schneider, of BA Securities Inc., part of BankAmerica, says that during this year’s first quarter, payrolls grew by 239,000 jobs a month. She says Friday’s report should show “the economy is not too strong and not too weak.” Pretty sunny.
… But watch for cloud
The nation’s purchasing managers have been providing a somewhat cloudy picture for manufacturing. A fresh report from their national association is due out Monday. The group’s monthly index declined in March to 51.4 percent from 54.5 percent a month earlier, sparking some concern. While anything above 50 percent shows the economy is expanding, analysts said a manufacturing slowdown would outweigh other indicators because the factory sector has led the current expansion. For what it’s worth, the Chicago chapter of the purchasing managers reported Friday that its index increased to 57.6 in April from 55 in March, suggesting that manufacturing activity is rebounding.
A close call
Analysts are split about Tuesday’s report on March new-home sales, with some expecting further signs of ennui. A 14 percent plunge in the category in February brought out doomsayers rushing to pronounce that the end was in sight, for the housing industry, at least. However, recent sales statistics have indicated a warmup is under way, helped by a downtick in mortgage rates.
Cultivating confidence
Consumer confidence has been springing up faster than blooms; it’s at its highest point since just before the 1990 recession. That may mean a revival is due for two key categories, auto sales and retail. Detroit’s carmakers report Monday and Tuesday, with most analysts expecting continued softness. The retail report is due out Thursday, and likely will tell a story of consumers jumping back into the stores, brandishing credit cards. Another report, due out Wednesday: leading indicators for March. Expect a modest revival, following a 0.2 percent drop in February, which was only the second decline in 19 months.
Earnings fest
First-quarter corporate profits are just about completely tallied, with a few more rolling in this week, and the results continue to amaze. One Wall Street seer called the earnings reports “a real blowout,” with roughly two-thirds of companies beating optimistic forecasts by their analysts. It marks the ninth quarter in a row that profits have exceeded expectations. Unfortunately, that also brings up questions of how long the good news can last. To pessimists, it’s only a matter of time until companies start stringing out disappointments.
`Hard to stop’
The stock market’s rally since early December “has been quite unusual,” says Walter Revis, technical market analyst for Principal Financial Securities Inc. He notes in his latest letter that, looking at a broad market average, “there has not been a single week where it has lost more than 0.6 percent or gained more than 2.7 percent” during the last 19 weeks. “While the risk/reward ratio for the overall market has become unattractive,” Revis says, “bull markets hitting new highs are hard to stop.” And how.
