The bond market also saw a high degree of churn. Yields declined through midweek to near 2.46%, but then cycled up to 2.56% at the end of the week as markets not only speculated about the size and intensity of the widely expected quantitative easing program from the Federal Reserve, but also responded to a range of views being expressed by Fed officials.

Next week, the indicators are expected to stay in the groove of very slow growth. New and existing home sales are expected to bounce up in September from recent lows, while durable goods orders get a lift from aircraft orders. But October consumer confidence readings will be ambiguous, pulled in opposite directions by a buoyant stock market contrasted with a weak growth and employment outlook. Third-quarter real GDP growth is expected to clock in at 1.6%, just below the 1.7% rate in the second quarter. While the top-line number looks steady as she goes, real final sales growth will see a sharp deceleration, driven by weaker residential investment, slower growth in business equipment spending, and decelerating growth in government spending. On a positive note, we should see a slight acceleration in consumer spending growth.

KEY U.S. DATA RELEASES THIS WEEK

Monday, October 25 – Existing Home Sales (Sep.)

• IHS Global Insight: 4.27 Mil.
• Consensus: 4.30 Mil.
• Last Actual: 4.13 Mil. (Aug.)

What to Look For

• Existing home sales to bounce up by 3–4% in September.

Implications

The latest two readings on pending home sales, plus the August and September MBA Mortgage Applications Purchases Index readings, imply that existing home sales should have improved by about 3-4% in September. But that is hardly good news, since sales of single-family homes in July and August were the lowest and second lowest in 15 years, respectively, despite record-low mortgage rates.

Tuesday, October 26 – Conference Board Consumer Confidence (Oct.)

• IHS Global Insight: 47.0
• Consensus: 49.5
• Last Actual: 48.5 (Sep.)

What to Look For

• The Conference Board's consumer confidence index is expected to decline by 1.5 points, to 47.0.

Implications

The Conference Board's index is expected to retreat from 48.5 to 47.0 due to declining expectations. Confidence remains fragile, and is being hurt by a weak labor market and uncertainty over what will be happening to taxes next year.

Wednesday, October 27 – Durable Goods Orders (Sep.)

• IHS Global Insight: 5.2%
• Consensus: 2.0%
• Last Actual: -1.3% (Aug)

What to Look For

• Durable goods orders should spike 5.2% in September, entirely due to a surge in aircraft orders, in line with figures already reported by Boeing.

Implications

Aircraft orders are volatile, and September was a huge month, with Boeing garnering orders worth more than $12 billion (117 planes, with 84 on the last day of the month), after taking orders for only $0.5 billion (10 aircraft) in August. The main downside risk to the anticipated surge would come if the late-month orders do not show up in the official statistics until October. Outside of aircraft, it should be another lackluster month, with the reversal of some of the positives that pushed core capital goods orders up by 5.2% in August.

Wednesday, October 27 – New Home Sales (Sep.)

• IHS Global Insight: 0.300 Mil.
• Consensus: 0.300 Mil.
• Last Actual: 0.288 Mil (Aug.)

What to Look For

• We expect a small increase in home sales during September.

Implications

Single-family housing permits—a good predictor for new homes sales—inched up 0.3% in September, after declining for five straight months. Based on this, we project a small increase in new home sales for September; but at an estimated level of just 300,000, sales would remain near record lows. They are unlikely to pick up until job growth accelerates.

Friday, October 29 – Real Gross Domestic Product (Advance estimate, Q3)

• IHS Global Insight: 1.6%
• Consensus: 2.2%
• Last Actual: 1.7% (Third estimate, Q2)

What to Look For

• Real GDP is expected to have grown by 1.6% in the third quarter, very similar to the 1.7% rate in the second.

Implications

We expect growth in final domestic purchases to slow to 1.5% (from 4.3% in the second quarter), reflecting a sharp fall in residential construction after the expiry of the homebuyers' tax credit, slower growth in government spending now that the Census is behind us, and slower growth in producers' durable equipment spending. Consumer spending, though, is expected to accelerate to 2.6% growth (from 2.2%). Foreign trade will likely become be a drag once again as imports outpace exports, but a less severe one, holding back growth by about 1.2 percentage points (compared with more than 3 percentage points in the second quarter). The trade drag should be roughly offset by another surge in inventory accumulation, partly reflecting rising imports. Overall, the report will show the economy remaining on a sluggish growth path, giving the Fed no reason to change its mind about the quantitative easing that seems likely on November 3.

Friday, October 29 – Michigan Consumer Sentiment Index (Final Oct.)

• IHS Global Insight: 68.8
• Consensus: 68.0
• Last Actual: 67.9 (Preliminary Oct.)

What to Look For

• The Reuters/Michigan consumer sentiment index is expected to improve to 68.8, from the preliminary October reading of 67.9,

Implications

The main driver of the expected increase is the stock market, which has climbed higher in the last couple of weeks. We think consumers will feel better about their current economic situation than they reported earlier in the month, and that expectations will hold steady.