Typically this is a week where I pay the most attention to incoming housing data in the form of both new and existing home sales, but because we live in “interesting times,” this week it’s different.

The Sword of Damocles hanging over the entire economy is policy uncertainty, for unfortunately obvious reasons. In case you haven’t seen this elsewhere, there actually is a “policy uncertainty index” that is updated daily. Below I show its entire history, both daily (dotted line) and biweekly (solid blue):

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On a biweekly basis, there has been more policy uncertainty in the past month than there has ever previously been in the history of the Index, including in the middle of the Covid lockdowns and even more surprisingly, more than during the near financial freeze-up of the economy in autumn 2008.

Needless to say, this is not conducive to undertaking big new projects. Further, because of the incipient trade war, there has been front-running of tariffs that will reverse - and may already have started to do so.

Which means that this Thursday’s durable goods orders report for March, although hardly up to the minute, will assume added importance. Here’s what new orders for durable goods (blue), durable consumer goods (gold), and core capital goods (red) look like since the pandemic:

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Most importantly, core capital goods orders have been rising in the past six months. We’ll see on Thursday if front-running caused a further increase in March.

The other big data points will be coming throughout the week from the regional Feds.

On Tuesday, Richmond will report both manufacturing and services conditions for this month. Philadelphia will also report on services. 

On Thursday, Kansas City will report on manufacturing, and on Friday it will report on services for this month.

Because a downturn in manufacturing, unless particularly severe, is not enough anymore to cause a broader downturn in the economy, the coincident measures of business conditions including services for April from the various regional Feds assume additional importance. The Philly Fed’s manufacturing report last week was horrible, and the NY Fed’s reports on both manufacturing and services also indicated contraction.

Finally, it will be worth paying additional attention to the AAR’s weekly rail carloads week report on Thursday, because there are indications that trans-Pacific shipping from China has already declined by more than half. If so, the next effect will be on rail shipping out of the West Coast. 

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