The elephant in the room will be the FOMC meeting on September 21. We expect that the FOMC will vote to keep the target range for the federal funds rate unchanged, and retain the "exceptionally low for an extended period" language. In addition, there is a greater-than-even odds that the Fed will reduce the interest rate paid on bank reserves to discourage excessive hoarding of cash balances held by banks at the Federal Reserve. Behind the scenes, there will be some discussion of additional quantitative easing measures, but we do not expect the Fed to jump on this, at least not yet.

KEY U.S. DATA RELEASES THIS WEEK

Tuesday, September 21 – Housing Starts and Building Permits (Aug.)

Housing Starts

• IHS Global Insight: 0.541 Mil.
• Consensus: 0.550 Mil.
• Last Actual: 0.546 Mil. (Jul.)

Building Permits

• IHS Global Insight: 0.574 Mil.
• Consensus: 0.560 Mil.
• Last Actual: 0.565 Mil. (Jul.)

What to Look For

• Starts are expected to have fallen by 0.9% in August.
• Building permits, though, will bounce up 1.6%.

Implications

Single-family housing permits have dropped over four straight months, and multi-family permits slipped in July. These declines point to a drop in housing starts over the next two months. For August, we project that starts fell 0.9%, to 541,000 units (annual rate).

Tuesday, September 21 – FOMC Announcement (Sep.)

• IHS Global Insight: 0.00–0.25%
• Consensus: 0.00–0.25%
• Last Actual: 0.00–0.25% (Aug.)

What to Look For

• The FOMC will vote to keep the target range for federal funds unchanged, and retain the "exceptionally low for an extended period" language.
• There is a greater-than-even odds that the Federal Reserve will reduced the interest rate paid on bank reserves to discourage excessive hoarding of cash balances held by banks at the Fed.

Implications

The press release from Federal Reserve’s FOMC September 21 meeting is expected to report that economic activity has slowed down even further since the August 10 meeting, reflecting the recent Beige Book summary that reported widespread evidence of a deceleration in momentum, as well as other leading economic indicators. The FOMC will vote to keep the target range for federal funds unchanged, and retain the "exceptionally low for an extended period" language. In addition, there is a greater-than-even odds that the Fed will reduced the interest rate paid on bank reserves to discourage excessive hoarding of cash balances held by banks at the Fed. The FOMC will certainly discuss the pros and cons of additional quantitative easing measures, but will not likely ramp them up at this time.

Thursday, September 23 – Existing Home Sales (Aug.)

• IHS Global Insight: 4.02 Mil.
• Consensus: 4.10 Mil.
• Last Actual: 3.83 Mil. (Jul)

What to Look For

• Existing home sales rose by about 5% in August.

Implications

Applications to buy homes began to inch up in mid-July, according to the Mortgage Bankers Association, and the Pending Home Sales Index increased 5.2% in July. Based on these readings, we project that existing home sales rose about 5% in August, to 4.02-million units (annual rate).

Friday, September 24 – Durable Goods Orders (Aug.)

• IHS Global Insight: -2.7%
• Consensus: -1.0%
• Last Actual: 0.3% (Jul)

What to Look For

• Durable goods orders for August are expected to be down 2.7%, with the major drag being commercial aircraft,

Implications

An likely drop in commercial aircraft orders will bring down the headline number, but we expect some positive bounce-back in computer and machinery orders. Machinery orders slumped 13.6% in July, as three large and volatile segments (oil and gas, turbines, and HVAC equipment) all plunged more than 20%. The machinery sector probably won't reverse July's entire decline, but it should give a noticeable boost to core capital goods orders.

Friday, September 24 – New Home Sales (Aug.)

• IHS Global Insight: 0.290 Mil.
• Consensus: 0.295 Mil.
• Last Actual: 0.276 Mil (Jul.)

What to Look For

• We project a small 5% improvement in new home sales.

Implications

The most severe post-tax credit payback period for new home sales—which set a record low in July—is probably behind us. With the economy and job growth slowly improving, we project a 5% improvement in new home sales, to 290,000 units.