(The Conference Board) Last week: The economy remains on solid footing but continues to sail into strong headwinds. And the latest readings from The Conference Board's Leading Economic Index suggest these trends could continue right through this summer and autumn. On the plus side, the job market may continue to open up, slowly cutting down the unemployment rate, a notch at a time. And the price of gasoline should start to moderate after Memorial Day. But the poor state of the housing market and potential continued increases in food prices (especially for meat) will likely prove problematic right through to the holidays. The budget battle may last just as long, even as better economic performance relieves some pressure on stressed state and local budgets.

Tuesday, May 24

4:00am Euro-zone Industrial New Orders (Eurostat)

New orders and industrial production have been relatively brisk in the euro-zone. New orders rose by 0.9 percent in February and may have repeated that performance in March and remain on solid footing through the spring. Euro consumers, not purchasing managers, hold the key to where growth will be heading on the continent going into the second half of the year.

Wednesday, May 25

8:30am Orders for Durable Goods (Bureau of the Census)

After falling for two months, the ordering pace recovered in March and likely continued to recover in April. New orders except for transportation rose by about 1.5 percent in March and probably increased by 1.0–1.5 percent in April. Consumer demand is not faltering. Business investment could be gaining some momentum. And export demand remains relatively robust. The combination of a little more domestic demand and a steady stream of orders from abroad is driving the ordering rate, and in turn, likely to lead to more industrial production, and some manufacturing hiring.

Thursday, May 26

4:00am The Conference Board Leading Economic Index ® (LEI) for Euro Area

This measure has been pointing to some momentum for the euro-zone economy over the past few months. Despite a slight dip in March, it has increased at about a 5-percent annualized rate over the prior six months, compared with a pace closer to 7 percent for the U.S. Leading Economic Indicators. These data seem to be suggesting that the industrial core of the euro-zone is expanding moderately. That is in contrast to some softening in conditions in some of the Asian economies, including China and India. What strength we've seen has been absent from most of the peripheral countries like Portugal or Greece and concentrated in core economies like Germany.

8:30am Gross Domestic Product (1Q - 2011) (Bureau of Economic Analysis)

After growing by 3.1 percent (annualized) in the fourth quarter of 2010, U.S. GDP increased at a slower pace in the first quarter of 2011. The preliminary estimate was 1.8 percent. New data on trade and inventory might push that number a little higher, perhaps to 2.0–2.1 percent. Moreover, overall economic growth in the current quarter appears to be a little stronger than in the first quarter. For one thing, the weather (though still causing some disruption) has not been as bad. That factor alone would result in slightly stronger economic performance. In sum, the economy remains on solid footing this spring and could even improve a bit this summer.

Friday, May 27

8:30am Personal Income and Outlays (Bureau of Economic Analysis)

With a few more jobs opening up, income growth is moving into a range of about 0.4–0.5 percent per month. Spending may be roughly in the same range. Both figures are more dependent on job growth than increases in wages. This situation might continue at least until autumn, when even wage growth might be stronger, and gasoline prices moderated.

THE SITUATION ABROAD

The global economy continues to expand moderately this spring. And most of the growth is centered in the emerging economies like China, India, and Brazil. Concerns about inflation and potential overheating are resulting in higher interest rates in all three countries. Moreover, industrial output and trade is beginning to moderate a little. Thus, overall growth in the emerging world could moderate this summer. Japan has slipped into recession. It might have done so even without the triple disaster. Elsewhere, slower growth is more likely spreading recessionary conditions.

FACT OF THE WEEK

45 percent. According to the UN Economic Commission for Latin America and the Caribbean (ECLAC) there are about 81 million young children and teenagers living in poverty in Latin America and the Caribbean. That is 45 percent of all those under the age of 18. In fact, about a quarter of the young population in Chile and Uruguay are in poverty. Elsewhere, including El Salvador, Guatemala, and Honduras, the figure is closer to two-thirds. And those three countries have growing problems with drugs and violence.

FACT OF THE WEEK II

34 percent. Manpower's survey of global recruitment firms shows that 34 percent of worldwide employers have difficulty finding qualified candidates to fill vacancies. It is significantly higher (57 percent) in Brazil. Technicians and skilled trade workers are among the occupational fields in which finding qualified candidates are particularly difficult. How can so many be in poverty while employers have difficulty finding people with the requisite skills?

QUESTION OF THE WEEK

What are the biggest risks to the global economy today?

Roughly two years after the global recession ended, there are a number of previously unforeseen circumstances buffeting the global economy. Few if any predicted the "Arab Spring." Concern about potential supply disruption has raised the world price of crude oil. And this is happening against the backdrop of the disasters in Japan, limiting electricity supply there, which in turn is disrupting the supply chain in electronic and motor vehicle part production. The lost nuclear power will have to be replaced, but more likely by liquefied natural gas (LNG) rather than crude oil — in part because crude prices have gone so high while prices of LNG have not.

Meanwhile, Germany's economy continues to outperform much of the developed world, against a backdrop of a continuing unfolding debt crisis (and questions about who eventually will bear the cost). Greece, Ireland, and now Portugal are dealing with the impact of major austerity programs. There is no guarantee that other countries won't need bailouts and have to accept similar austerity programs. And how long can the euro-zone endure with a super-strong economy like Germany's side-by=side with countries struggling with such programs?

In the U.S., the ongoing foreclosure situation (perhaps as many as 1.5 million more homes will be foreclosed) has yet to run its course. That holds down construction and weighs negatively on home pricing. This, in turn, acts as a negative with respect to consumer confidence and willingness to finance big-ticket items. Since the consumer accounts for two-thirds of GDP, this is not a small matter in what remains a principal economic force in the global economy.

To be sure, the global economy seems to be on track to grow by about 4 percent this year, despite these and other risks. Put another way, with better oil market conditions, a recovered Japanese economy, and healing U.S. housing market, global growth might be even faster. In turn, that would possibly drive food prices even higher.

Again, few saw the "Arab Spring" coming. Few thought the earthquakes in the world's "Ring of Fire" would cause this much disruption. Few thought the U.S. housing crisis would take this long to play out. All of which makes one ponder: What other unknown unknowns are out there?