Piecing Together the Economic-Growth Puzzle

January 2016 saw the worst start to a new year ever in the markets, but recent economic data have shown just how resilient the world’s biggest economy has been.

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On Friday, Wall Street will digest the second read on first-quarter gross domestic product. Economists polled by Thomson Reuters expect an upward revision to 0.9% annualized growth from a 0.5% reading last month.

Bryce Doty, senior fixed income manager at Sit Investment Associates, which manages $14 billion in assets, said he’s looking to see stronger-than-expected growth, which would bolster the idea that the economy wasn’t as bad off as feared in the first three months of the year, and set for a rebound in the second quarter. Expectations for second-quarter annualized growth stand at about 2.2%.

“It’s just one of many data points that shows the economy is in good shape, the consumer is in good shape, and despite that weakness in manufacturing, the overall economy is still continuing to grow,” he said.

Indeed, data in recent weeks have shown strength in the U.S., with the housing market having had a particularly strong showing so far in the spring selling season. Data from the National Association of Realtors on Thursday showed sales of previously-owned homes rose 5.1% last month, blowing past expectations for a 0.6% increase, notching a 10-year high. Meanwhile, new home sales in April jumped a whopping 16.6% to an eight-year high, while existing home sales rose 1.7%.

Elsewhere, durable goods orders in April soared 3.4% thanks to strength in jet orders, consumer sentiment as tallied by the University of Michigan improved much more than forecast in May, alongside better-than-expected retail sales in April.

Import prices and wholesale inflation rose less than expected, while U.S. and regional manufacturing activity slipped. Despite the seemingly robust durable-goods data, economists at Deutsche Bank pointed to a slowdown in core durable goods orders, which exclude defense and aircraft orders. The figure declined 0.8% in April after a 0.1% decline in the month prior. In a forward-looking note, they said the “disconcerting trend” in that data offsets better-than-expected trade data, and thus their expectations for how economic data would impact future Federal Reserve decisions on interest rates.

“The weakness in core durable goods is likely to persist given the recent softness in the various regional PMIs such as New York, Philadelphia, and Richmond Fed surveys,” they wrote. “Our best guess is that monetary policymakers will continue to expect current-quarter real GDP growth of around 2% if not modestly better.”

Deutsche Bank’s (NYSE:DB) economists and Doty agree, there are several key pieces of data to watch ahead of the Fed’s next meeting, including the May jobs report, due out next Friday as well as key reads on inflation.

“They’ll be looking at personal consumption components, the core PCE in order to project forward what to expect for the rest of this year,” Doty said. “I think they’ll find they have enough support or strength in the data to justify a [rate] increase. It’s just a matter of if they’ll have the courage to do it.”