By Theresa Sheehan

PRINCETON (MNI) – On the heels of the release of the February
employment data, the March week ahead will include other critical
economic reports that will round out perceptions of how the economic
recovery is progressing mid-way through the first quarter of 2012.

Expectations for any alteration in monetary policy at the March 13
deliberations of the Fed’s policymaking Federal Open Market Committee
are virtually nonexistent. The FOMC made significant changes in policy
at the January 24-25 meeting, and the Committee’s forecasts will not be
updated until the April 24-25 session.

The totals for retail and food sales in February at 08:30 ET
Tuesday should reflect the strong sales of motor vehicles and the higher
price of gasoline. Excluding these two components, other categories are
likely to show solid gains as well. The monthly same-store sales
comparisons point to gains for department and apparel stores. The
unusually mild weather probably helped sales in building materials and
garden stores as consumers got an early start on winter cleanup and
repair.

The inflation data is expected to show the impact of steep gains in
oil prices. The Import Price Index for February at 08:30 ET Wednesday,
the PPI for February at 08:30 ET Thursday, and the CPI for February at
08:30 ET Friday should all have substantial gains in the energy
components. In the Import Prices Index it will be reflected in the
overall cost of petroleum. In the PPI and CPI it will be more visible in
gasoline prices.

However, food prices are probably going to show only modest
increases at most for February. Recent run-ups in tobacco prices should
flatten out. The start of year increase in medical care and drugs as new
pricing goes into effect should abate. Prices for cars and light trucks
should rise only slightly, at most.

The first monthly reads on consumer confidence will be reported in
the week. Tuesday at 10:00 ET, the IBD/TIPP Economic Optimism Index will
be released. Friday at 09:55 ET, the preliminary Reuters/University of
Michigan Consumer Sentiment Index will be published. In spite of the
rise in gasoline prices — which historically restrains confidence —
measures of consumer perceptions of conditions have improved somewhat in
the last few months. It would appear that gains in the labor market are
boosting attitudes.

The NFIB Small Business Optimism Index for February at 07:30 ET
Tuesday will provide a look at confidence among that segment of
businesses. The index was essentially unchanged at 93.9 in January, but
could well resume some upward momentum for February.

The factory sector will get a fair bit of fresh data this week. The
two earliest of the manufacturing surveys will be released on Thursday.
At 08:30 ET, the New York Fed’s Empire State Survey and at 10:00 ET the
Philadelphia Fed’s Business Outlook should both present a picture of
moderate expansion. New orders have been on the rise, and there have
been steady gains in employment.

The data on industrial production and capacity utilization in
February at 09:15 ET Friday should show respectable gains for
manufacturing, and probably a resumption of mining activity along with
gains in oil prices. However, an unusually mild February should restrain
output for utilities. The drop will be less precipitous than in the
prior month, but spring-like weather in much of the country will lower
demand for heating.

Weekly initial jobless claims at 08:30 ET Thursday will cover the
week ended March 10. There may be some weather-related volatility after
severe late winter storms battered parts of the country. However, the
underlying trend for new filings for benefits appears to be settling
around the mid-300,000s.

Most of the remaining data probably will not have much impact for
markets.

The Treasury International Capital System (TICS) data for January
at 09:00 ET Thursday should reflect the greater stability in global
financial markets and less flight-to-safety into US debt.

The Conference Board’s Leading Economic Index for February at 10:00
ET Thursday should point to growth for a fifth consecutive month with
rising stock prices, higher consumer confidence, increases in building
permits issued, and lower levels of jobless claims.

Business inventories for January at 10:00 ET Tuesday will provide
the last bit of data on inventory growth as 2012 got off to a start, and
perhaps some revision for December.

The BLS will release two second-tier labor market reports at 10:00
ET Tuesday. The data on state and regional employment for January will
incorporate the revisions from the national survey. The February data
will be released Friday, March 30. Markets will probably be more
interested in the February data on Job Openings and Labor Turnover
(JOLTS) that have continued to signal some modest upward momentum for
labor markets in recent months.

The Current Account balance for the fourth quarter at 8:30 ET
Wednesday will reiterate what the numbers for international trade have
already reported, but will also include fresh data on remittances
abroad.

The week ahead will also see the last of the routine monetary
policy statements issued by major central banks for this month. The Bank
of Japan Policy Board will meet Monday and Tuesday, and the outcome
will be announced in the overnight hours of Tuesday-Wednesday.

As mentioned earlier, the FOMC will meet in a one-day session
Tuesday, with the post-meeting statement expected at 14:15 ET. There
will be no update to the FOMC’s forecast or news conference by the
Chairman.

The Board of Governors will meet in closed session around midday
Monday to discuss discount rate policy. We anticipate no changes in the
current 75 basis point discount rate. When the minutes are released, we
expect to see that Kansas City continued to advocate for a 25 basis
point rise, while Boston remained in favor of a 25 basis point cut.

The Treasury will auction the second leg of the quarterly refunding
with new 3-year notes, and re-openings of the 10-year notes and 30-year
bonds on Monday through Wednesday, respectively. Usually the Treasury
would auction these on Tuesday through Thursday, but in order to allow
them to settle on the 15th, the schedule was moved up a day. A reopening
of the last 10-year TIPS notes will be announced on Thursday for auction
on Thursday, March 22.

** Stone & McCarthy Research Associates **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]