A speech this week, Federal Reserve chairwoman Janet Yellen
is expected to provide economic details of the US economy.
Photo by Reuters.
It is a massive week for United States economic data,
with first-quarter GDP due early on Thursday, followed by the
outcome of the Federal Reserve's April meeting and the monthly
Concern is emerging about a slowdown in the recovery of the
US economy which will cause the Fed to hold interest rates
lower for longer, adding to the upwards pressure on the New
Zealand and Australian currencies.
Craigs Investment Partners broker Chris Timms said the first
of the reports - the first estimate of economic growth for
the three months ended March - was expected to reflect
extensive weather-related disruptions to output.
Markets expected an annualised reading of just 1.1% of
economic growth, well below the 2.6% posted in the final
quarter of last year.
''Most economists see this rebounding strongly in the current
quarter, so a weak reading will largely be put down to the
effects of the weather.''
With GDP being reported about 1am New Zealand time, the next
piece of information would be the conclusion of the Fed
meeting at 6am, Mr Timms said.
There was no press conference or update of economic
projections for the meeting, although the following day Fed
chairwoman Janet Yellen was scheduled to give a speech that
might provide insights into any change in view.
The Fed was expected to taper its its quantitative easing
(QE) programme by another $US10 billion ($NZ11.66 billion) a
month which would take QE to $US45 billion a month, down from
$US85 billion for most of last year, Mr Timms said.
Westpac chief economist Dominick Stephens said the Fed's
market committee was more circumspect last month on current
economic momentum, but remained resolute in its expectations
about the outlook.
Since then, Fed communications had remained consistent with
the thesis that barring a material downside surprise on the
economy, the tapering process would continue in measured
steps in coming months. The next step would be a further
$US10 billion reduction.
''As is clearly apparent from the tone of available partial
data, the likely outcome for first quarter GDP, and the
absence of activity in the housing sector, underlying
momentum is poor. That said, the Fed's preference is [to]
continue tapering, and keep rates unchanged for as long as
The April Institute for Supply Manufacturing (ISM) factory
survey was likely to show a slowdown relative to where the
economy was at in the second half of last year, Mr Stephens
The US April jobs report, due out early on Saturday, might
provide good news, Mr Timms said.
In March, 192,000 jobs were added and the consensus for April
was for 220,000 jobs to be added.
''There is some potential for an even better number than
this, when we consider the four-week average of initial
jobless claims hit a post-recession low for the week the
April jobs survey was conducted.''
In New Zealand, building consents are due out tomorrow, as
are some measures of business confidence.
Westpac is forecasting a 4% rise in March consents.
Falling house sales in recent months would ordinarily be a
red flag for a drop in building activity, but Mr Stephens
said there were two factors which suggested the wedge would
persist: the necessity of the Christchurch rebuild and the
Reserve Bank's restrictions on high loan-to-value lending
which had dampened turnover but not the underlying demand for