- Trump threatens to veto pandemic relief bill
- Dec U.S. consumer sentiment expected to be revised lowerÂ
- U.S. PCE deflator expected to remain well below target
- U.S. new home sales expected to edge lower from 14-year high
- U.S. FHFA house price index expected to show another strong increase
- U.S. initial unemployment claims expected to fall slightly after 2-week increase
Trump threatens to veto pandemic relief bill — President Trump late Tuesday indicated that he might not sign the pandemic rescue bill passed by Congress because it contains “wasteful and unnecessary spending” and that the stimulus checks of $600 are “ridiculously low.”
The markets are left to wonder whether Mr. Trump is serious about vetoing the bills or whether he is merely searching for relevance in the waning days of his Administration.
President Trump has until this coming Monday (Dec 28) to sign the pandemic aid and omnibus spending bill or there will be a government shutdown starting on Tuesday. Congress on Monday passed a 7-day continuing resolution to keep the government open until December 28 in order to provide time for the omnibus spending bill to be printed and presented to the President for his signature. The markets would obviously be highly disappointed if Mr. Trump were to veto the $900 billion pandemic aid bill.
The House and Senate already intend to return to session early next week to be available in the event that President Trump carries out his threat to veto the National Defense Authorization Act, forcing Congress to try to override his veto. That bill passed Congress by a wide, veto-proof margin. The current Congress can only pass bills until January 3, when the new Congress will take over. After January 3, any unfinished bills from the last session will expire, and the new Congress will have to start over and pass any new bills from scratch.
If Mr. Trump carries out this threat to veto the pandemic aid and omnibus spending bill, then Congress this coming Monday (Dec 28) will either have to amend the bill to satisfy Mr. Trump, try to pass the bills with a veto-proof majority, or simply allow the pandemic bill to fail and move forward with the omnibus spending bill to prevent a government shutdown.
Dec U.S. consumer sentiment expected to be revised lower — The consensus is for today’s final-Dec University of Michigan U.S. consumer sentiment index to be revised lower by -0.4 to 81.0 from early-Dec, which would leave the index up by +4.1 points from November rather than the preliminary increase of +4.5.
There is a risk of a weaker-than-expected report today considering that the Conference Board yesterday reported that its Dec consumer confidence index fell by -4.3 points to a 4-month low, adding to November’s -8.5 point decline. Consumer sentiment is currently taking a hit to the surge in the pandemic, which is hurting businesses and is causing new worries among consumers about the labor market.
U.S. PCE deflator expected to remain well below target — The consensus is for today’s Nov PCE deflator to be unchanged from October’s report of +1.2% y/y. The Nov core PCE deflator is expected to be left unchanged from its October report of +1.4% y/y. The PCE deflator is the Fed’s preferred inflation measure.
Even though the PCE deflator remains well below the Fed’s 2.0% inflation target, the market is expecting higher inflation in the future. The 10-year breakeven inflation expectations rate posted a post-pandemic high of 1.96% on Monday before backing off a bit to 1.94% on Tuesday. Despite the current strength in inflation expectations, the Fed has said that it will leave rates at the current near-zero level until the inflation statistics are on their way above 2.0% for a sustained period of time.
U.S. new home sales expected to edge lower from 14-year high — The consensus is for today’s Nov new home sales report to show a small decline of -0.4% to 995,000, adding to October’s decline of -0.3% to 999,000. Despite the expected back-to-back decline, new home sales would remain just slightly below September’s 14-year high of 1.002 million units.
New home sales have been extremely strong as people look to move out of multi-family units or move into larger single-family homes. However, home sales have been curbed by the lack of homes on the market. The supply of new homes available for sale on the market fell to a record low of 3.3 months in September and October.
U.S. FHFA house price index expected to show another strong increase — The consensus is for today’s Oct FHFA house price index to show an increase of +0.6% m/m, adding to September’s sharp increase of +1.7% m/m. The FHFA in September rose by an extraordinary +9.1% on a year-on-year basis.
U.S. home prices have risen sharply due to the combination of very strong demand and tight supplies. Home sales are near 14-year highs, while the supply of homes on the market is at record lows.
U.S. initial unemployment claims expected to fall slightly after 2-week increase — The consensus is for today’s weekly initial unemployment claims report to show a decline of -5,000 to 880,000, reversing part of last week’s +23,000 increase to 885,000. Meanwhile, continuing claims are expected to rise by +52,000 to 5.560 million, reversing part of last week’s -273,000 decline to 5.508 million.
Initial unemployment claims have risen by a total of +169,000 in the past two weeks, which indicates that layoffs have increased and that more people have been forced to file for unemployment. The U.S. labor market remains in very weak shape, with initial claims being 668,000 above February’s pre-pandemic level and continuing claims being +3.809 million above February’s pre-pandemic level.
