Despite these new problems in the fixed-income and mortgage markets, indicators rolling up on the radar screen for the first quarter of 2010 will look fairly solid. Real consumer spending is expected to advance in February, while light-vehicle sales are projected to jump to near 12-million units in March—real spending for the first quarter is now expected to exceed 3%, its strongest gain in three years.

While construction spending should slump yet again in February, the March ISM index will likely climb a little higher, and we project roughly 200,000 new jobs in March. Excluding Census hiring and weather distortions, we expect to see a modest increase in private-sector jobs—that will represent a key watershed in the progress of the recovery.

KEY U.S. DATA RELEASES THIS WEEK

Monday, March 29 – Personal Income, Consumption and Prices (Feb.)

Personal Consumption, Nominal

• IHS Global Insight: 0.3%
• Consensus: 0.3%
• Last Actual: 0.5% (Jan.)

Personal Consumption, Real

• IHS Global Insight: 0.3%
• Last Actual: 0.3% (Jan.)

Core PCE Price Index

• IHS Global Insight: 0.1%
• Consensus: 0.1%
• Last Actual: 0.0% (Jan.)

Personal Income

• IHS Global Insight: 0.0%
• Consensus: 0.1%
• Last Actual: 0.1% (Jan.)

What to Look For

• Personal income to be flat.
• Real consumption spending to rise a solid 0.3%.
• Core PCE deflator to edge up 0.1%.

Implications

Overall, we expect no gain in personal income in February. We are expecting little or no gain in private compensation, since aggregate hours worked fell 0.3%, while average hourly earnings edged up 0.1% during the month, according to the February employment report. Dividends and personal interest income should be down again, while transfers should be up. Overall, consumer spending should be up 0.3% in February, both in nominal dollars and adjusted for inflation. The retail sales components used to estimate part of consumer spending in the GDP accounts (sales excluding motor vehicle dealers, building/garden supply stores, and gasoline stations) advanced a strong 0.9% in February. Auto sales were down, however, while spending on services should post another anemic gain (an estimated 0.2–0.3%). For the first quarter overall, real consumer spending growth is likely to come in at just over 3%, its strongest gain in three years. The core CPI index increased 0.1% in February, and we are expecting a similar 0.1% increase in the core PCE index. That would take the core PCE inflation rate down to 1.3% (year-on-year), from 1.4% in January. Core inflation has almost disappeared in recent months; the annualized rate over the past four months will be just 0.7%.

Tuesday, March 30 – Conference Board Consumer Confidence (Mar.)

• IHS Global Insight: 56.6
• Consensus: 50.0
• Last Actual: 46.0 (Feb.)

What to Look For

• The Conference Board's Consumer Confidence Index is expected to rebound from a 10-month low of 46.0 in February to 56.6 in March.

Implications

Preliminary signs of an upturn in labor markets, along with further gains in stock prices, will be the main drivers of an expected strong rebound from what looks like a rogue downshift in February. Consumers are also reporting some improvement in personal finances. Reports of rising light-vehicle sales in March are another indication that the consumer market recovery is gaining momentum.

Thursday, April 1 – Construction Spending (Feb.)

Construction Put in Place

• IHS Global Insight: -1.6%
• Consensus: -1.0%
• Last Actual: -0.6% (Jan.)

Construction Excl. Residential Improvements

• IHS Global Insight: -1.8%
• Last Actual: -1.5% (Jan.)

What to Look For

• Construction spending is expected to decline by 1.6%.

Implications

Construction spending is weak across the board. In January, single-family construction fell for the first time in eight months. Public construction spending (down six straight months), nonresidential construction (down ten straight months) and multi-family construction (also down ten straight) are faring worse. We are expecting another bad reading for February, made worse by the snowstorms.

Thursday, April 1 – ISM Manufacturing Index (Mar.)

• IHS Global Insight: 57.0
• Consensus: 57.0
• Last Actual: 56.5 (Feb.)

What to Look For

• The index for manufacturing should show another solid reading in March, edging up to 57.0, from 56.5 in February.

Implications

Regional readings have been mixed, and do not suggest a major move. The recovery in manufacturing is solidly in progress, albeit not frenetic. Last month suffered a minor downtick, and a stronger bounce-back to the January reading of 58.4 is possible. Any reading in the 55–60 region would still signal a solid recovery.

Thursday, April 1 – Motor Vehicle Sales (Mar.)

• IHS Global Insight: 12.0 Mil.
• Consensus: 12.0 Mil.
• Last Actual: 10.4 Mil. (Feb.)

What to Look For

• Light-vehicle sales expected to bounce up to 12.0-million units.

Implications

The incentive blitz, initiated by Toyota and followed by other manufacturers, should help bolster March light-vehicle sales results to a 12.0-million seasonally adjusted annual rate (SAAR), the highest monthly level since the government funded Cash-for-Clunkers program pushed August 2009 to a 14.1-million SAAR.

Friday, March 5 – Employment Report (Mar.)

Nonfarm Payrolls

• IHS Global Insight: 200,000
• Consensus: 190,000
• Last Actual: -36,000 (Feb.)

Unemployment Rate

• IHS Global Insight: 9.7%
• Consensus: 9.7%
• Last Actual: 9.7% (Feb.)

Average Hourly Earnings (All Employees)

• IHS Global Insight: 0.2%
• Consensus: 0.2%
• Last Actual: 0.1% (Feb.)

What to Look For

• We expect payroll employment to jump by 200,000 in March, although this exaggerates the underlying strength of the labor market.

Implications

There are likely to be more than 100,000 temporary workers hired for the Census, which will inflate the headline gain. And employment will also be boosted by the reversal of weather-related losses in February. Nobody knows how big the weather losses were, but they were probably at least 50,000. Stripping out Census and weather effects, we would expect a small, but still positive, change in underlying employment, which would be good news—just not as good as the headline 200,000 figure would suggest. We expect a steady unemployment rate, at 9.7%, with increased labor-force participation offsetting higher employment.