May 27 - Analysts disagree on what the flood of economic data released Tuesday reveals about the outlook on GDP. Lily Jamali reports.
Tuesday brought a flood of U.S. economic data dealing with housing, manufacturing, and consumer confidence. Wall Street is watching closely, with hopes that the second quarter will be better than the dismal one that came before. Jim O'Sullivan, Chief U.S. economist at High Frequency Economics, says it will be: SOUNDBITE: JIM O'SULLIVAN, CHIEF U.S. ECONOMIST, HIGH FREQUENCY ECONOMICS (ENGLISH) SAYING: "We are due for some payback for sure after the first quarter, even if we don't get complete payback. When you average the two quarters, it might not look so great. But no question, in isolation, Q2 will look quite good." With the second of three readings on first quarter GDP on the horizon, May saw a rise in consumer confidence, a positive sign for consumer spending, which makes up two-thirds of U.S. economic activity. And orders for durable goods in April rose, flouting negative expectations. Still, within the Commerce Department data, a statistic that indicates prospects for future business investment fell. But O'Sullivan says a strong revision from the previous month is promising for second quarter GDP: SOUNDBITE: JIM O'SULLIVAN, CHIEF U.S. ECONOMIST, HIGH FREQUENCY ECONOMICS (ENGLISH) SAYING: "If you look through the ups and downs, there's a clear bounce back in CapEx in the past couple of months and when you look at Q1 GDP, one of the weak parts was CapEx. When you look at the orders numbers, it's pretty clear that CapEx is trending up much more solidly." In housing, S&P Case Shiller data released Tuesday shows home prices rising in March, although growth is slowing. Growth also cooled off for new homes sales. Michael Gayed, Chief Investment Strategist at Pension Partners, says emerging patterns in the bond market are reason for concern: SOUNDBITE: MICHAEL GAYED, CHIEF INVESTMENT STRATEGIST, PENSION PARTNERS (ENGLISH) SAYING: "We have to question why it is that 30-year bond yields have been dropping, even though at the margin there seems to be some excitement for some data points that look better than expected. I think that's at odds with anything we hear news-wise about how the economy is doing." Positive news in the latest data hasn't left him any more optimistic on the future. SOUNDBITE: MICHAEL GAYED, CHIEF INVESTMENT STRATEGIST, PENSION PARTNERS (ENGLISH) SAYING: "I think it's wildly unclear. I think just looking at recent history, the Fed expects things to get better. The Fed has expected things to get better for the last 5 years. In general, the optimism bias is not really validated by any economic data after the optimism kicks in." Gayed says we're only now starting to see the Fed pullback in monetary policy being filtered into the economy.