By Theresa Sheehan
PRINCETON (SMRA) – In the week ahead, the return of Fed
policymakers to the public speaking circuit will provide an opportunity
to sift among the Committee members’ respective opinions about the
September 21 decision to provide additional accommodation in the form of
increasing the average maturity of the Fed’s portfolio.
The economic data calendar is reasonably busy, however, most of the
excitement will be reserved for the following week when the September
employment report is released.
Economic Data
Three themes run through the week’s scheduled releases: the factory
sector, the housing market and consumer confidence.
There are three District Bank manufacturing surveys for September
on the calendar this week. The already-released reports from the New
York and Philadelphia Districts showed the late-August impacts from
Hurricane Irene, and remained pessimistic in the outlook after soft
readings in August.
The Richmond Fed Manufacturing Survey at 10:00 ET Tuesday will
probably join the two earlier reports in reflecting severe weather
impacts. Although flooding was less extensive in the more southern
District, there were widespread and prolonged power outages and
disruptions in late summer tourism, as well as some damage and unease
after the earthquake on August 23.
The Dallas Fed’s Texas Manufacturing Outlook at 10:30 ET on Monday
could also show some weather impacts as oil production in the Gulf of
Mexico was restrained as a series of strong storms blew through the
area.
The Kansas City Survey of Manufacturing at 11:00 ET on Thursday
will probably be the best of the reports. The index has remained
positive for the past two years, and although recent months have showed
some slowing, growth continues.
The Chicago Purchasing Managers Business Barometer for September at
9:45 ET on Friday will be grouped with the manufacturing surveys, but it
does include some non-manufacturing industries. This index has remained
consistent with expansion, although at a slower pace in the last few
months.
We will get some additional data on conditions in the service
sector with reports from the Dallas and Richmond Feds on Monday and
Tuesday, respectively. Service businesses have been struggling as
consumer confidence and spending have fallen.
Durables orders for August at 8:30 ET on Wednesday may get another
boost from transportation. There was a jump in Boeing orders in July (up
67 from June), and it is possible that not all those orders were on the
books, and thus could show up to augment the August numbers (up 12 from
July). Sales of motor vehicles also suggest that orders for new cars and
trucks will help the total. Still, other components are likely to show
some softer trends.
Sales of new single-family homes in August at 10:00 ET on Wednesday
will fill out the picture for activity in the housing market. The level
of sales has stuck close to the 300,000 mark since May 2010, and the
August data will probably continue near that reading. There may be some
negative impacts in the numbers for the Northeast due to Hurricane Irene
late in the month.
The NAR Pending Home Sales Index for August at 10:00 ET on Thursday
could also show some weather impacts, as well as from sagging consumer
confidence as potential buyers stayed out of the market. Even
historically low mortgage interest rates will have a hard time
overcoming concerns about conditions in the economy and the prospect of
increases in unemployment.
The closely-watched S&P/Case-Shiller Home Price Index for July at
9:00 ET on Tuesday should read much the same as the previously released
FHFA House Price Index. Declines in home values are slowing, and the
worst of the current downward trend appears to have passed.
The Conference Board’s Consumer Confidence Index for September at
10:00 ET on Tuesday should reflect the same improvements that have been
visible in other measures of confidence. However, consumers remain quite
gloomy, and it will be difficult to expect any substantive turnaround
until the labor market firms up.
The final reading of the Reuters/University of Michigan Consumer
Sentiment Index for September is expected at 9:55 ET on Friday. The
preliminary index was at 57.8, and a small upward revision is possible.
However, these levels are consistent with those seen during some of the
worst months of the recession, particularly during early 2009 when
layoffs were at a peak.
Initial claims for the week ended September 24 at 8:30 ET on
Thursday will probably continue to retreat a bit from recent
weather-related increases, but the overall improvement is likely to be
slow. The underlying trend for new claims remains stubbornly in the
vicinity of 400,000, and a wave of layoff announcements should help keep
it there.
The second revision of the estimate for second quarter GDP is set
for 8:30 ET on Thursday. Since we are now nearing the end of the third
quarter, this report will get little attention in markets.
The data on personal income and spending for August at 8:30 ET on
Friday may prove more interesting. Consumers were reluctant to spend in
the month, and incomes could feel the pinch as businesses held the line
on wage increases. The PCE price deflator should reflect the upward
pressure in prices as some commodities costs remained elevated.
Federal Reserve Policymakers
There is a fairly steady stream of speeches on the public
engagement calendar for Fed officials this week. Although not all the
announced topics are directly concerned with monetary policy, the Q&A
sessions are likely to focus on the FOMC decision to provide
accommodation in the Maturity Extension Program (MEP). Two of the
scheduled speakers include Minneapolis’ Kocherlakota on Monday and
Philadelphia’s Plosser on Thursday, both of whom cast a dissenting vote
at the last two meetings, in additional to Dallas’ Fisher. We anticipate
that these two at least will downplay any rifts among Fed officials
other than on an approach to policy.
A Monday speech from Gov. Sarah Bloom Raskin will address monetary
policy and jobs creation. Its proximity to the Sept. 21 FOMC decision
will heighten interest in this topic. Since the FOMC decision is all
about generating some fresh momentum for the recovery and preventing
heightened risks to growth from getting more entrenched, anything Raskin
can say about the Fed’s intentions will get a close listen.
Chairman Bernanke is scheduled to speak on Wednesday. Althought his
announced topic is not on monetary policy, it is hard not to speculate
that he will take the opportunity to digress briefly and say a few words
about the FOMC decision, its assessment of economic conditions, the
Portfolio Balance Channel and/or the Maturity Extension Program.
In any case, we anticipate that policymakers will confirm that
their collective and individual forecasts for the U.S. economy are more
downbeat. We expect that all will deliver some variant of the September
21 FOMC statement which read, “The Committee continues to expect some
pickup in the pace of recovery over coming quarters but anticipates that
the unemployment rate will decline only gradually toward levels that the
Committee judges to be consistent with its dual mandate. Moreover, there
are significant downside risks to the economic outlook, including
strains in global financial markets.”
U.S. Treasury Auctions
The U.S. Treasury will auction new 2-, 5-, and 7-year notes on
Tuesday, Wednesday, and Thursday, respectively. All three issues will
settle on Friday, September 30, along with the reopening of the 10-year
TIPS note auctioned in the prior week.
** Market News International Washington Bureau: 202-371-2121 **
[TOPICS: M$$FI$,M$U$$$,MAUDS$]
