The look ahead: US consumer indicators, Japanese manufacturing, PCAOB meeting

This week’s economic news agenda includes a handful of reports indicating the mood of US consumers as well as data on Japanese manufacturing nearly one year after the devastating earthquake of March 11, 2011. The PCAOB also will hold a meeting to consider whether to issue for public comment a proposed auditing standard on related parties.

US indicators

Reports coming out this week on a handful of key indicators, including durable goods orders, consumer confidence and gross domestic product, will provide investors a better idea of how secure US consumers feel about their financial future.

- The National Association of Realtors will start the week of key indicator reports Monday with an update of the US pending home sales index. The report measures home resales under contract.

Consumers generally have to be comfortable and confident in their own financial position to buy a house. This narrow piece of data has a powerful multiplier effect through the economy.

The pending home sales index rose a strong 7.3% in November on top of October’s 10.4% gain, but contract signings eased in December, falling 3.5%.

- The Conference Board will release its Consumer Confidence Index on Tuesday. The index tracks how consumers view current business and employment conditions and what they expect for the next six months.

Also on Tuesday, the US Department of Commerce will release the latest durable goods orders report. The numbers reflect new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods such as industrial machinery, trains, refrigerators and automobiles.

Consumer spending drives about two-thirds of the US economy, and economic growth suffers when Americans don’t feel secure about their financial future. Consumer confidence and spending contracted during the credit crunch and the recession in 2008 and 2009. Since then, consumer confidence has edged back up. Results of the latest bimonthly survey by insurance and investment firm Country Financial suggested that Americans feel more secure than in the past two years.

Orders for durable goods show how busy factories will be in the months to come as manufacturers work to fill those orders. The data reflect demand for expensive consumer items and business investments.

- The US Bureau of Economic Analysis on Wednesday will release its quarterly US GDP update, which consists of purchases of domestically produced goods and services by individuals, businesses, foreigners and government entities. After a slowdown at the end of 2010, GDP increased slowly throughout 2011 and accelerated in the fourth quarter of 2011. Fannie Mae suggested in a report Tuesday that in 2012 the US housing sector would add to GDP for the first time in seven years.

Japanese industrial production

The uncertain manufacturing climate in Japan will come into better focus when the country’s Ministry of Economy, Trade and Industry releases its preliminary industrial production report for January on Wednesday.

Europe’s debt crisis and the slow economic recovery in the US may be keeping demand soft in two key Japanese export markets. The seasonally adjusted index for December showed Japanese production up 3.8% from November, but down 4.3% from December 2010. Shipments were up 4.6% in December over November, but down 3.0% from the previous year.

March 11 marks the one-year anniversary of the devastating earthquake near the east coast of Honshu that led to the crisis at the Fukushima nuclear plant and created major challenges for the nation’s manufacturers and overall economy. More recently, flooding in Thailand disrupted Japanese manufacturers’ supply chains.

PCAOB considers comment periods

The US Public Company Accounting Oversight Board will hold an open meeting at 9:30 a.m. EST Tuesday in Washington to consider issuing a variety of proposals for public comment.

Among the issues discussed for possible public comment issuance will be a proposed standard on related parties and proposed amendments to other auditing standards to address related issues, including significant unusual transactions.

The PCAOB also will consider proposing for public comment amendments to PCAOB rules and forms that would conform them to the Dodd-Frank Wall Street Reform and Consumer Protection Act, PL 111-203, provisions requiring the PCAOB to oversee the auditors of SEC-registered brokers and dealers. Public comment periods also will be considered for other technical changes to PCAOB rules and forms.

A webcast of the meeting will be made available Tuesday through a link on the PCAOB website. A recording of the meeting also will be available later in the day via a podcast.

—Ken Tysiac (ktysiac@aicpa.org) and Sabine Vollmer (svollmer@aicpa.org) are CGMA Magazine senior editors.