By Theresa Sheehan
PRINCETON (SMRA) – The week ahead will see a number of important
economic data releases that mainly focus on consumer spending,
inflation and the manufacturing sector. There will also be some fresh
data on consumer confidence, as well as a few numbers that will help
fill out expectations for growth in the third quarter.
Economic Data
The data on retail sales for August at 8:30 ET on Wednesday could
surprise a little to the upside, but on the whole it is not likely to be
a stellar performance. Sales of motor vehicles were decent in the month.
Prices for gasoline declined, and should cut into sales at service
stations. Back-to-school shopping was lackluster, but demand for
emergency supplies related to large severe weather events could boost
some categories like building materials. Worried consumers were cautious
about discretionary spending, such as restaurant meals or entertainment.
On balance, retail sales should be little changed from the prior
month.
Inflation numbers will be released on Tuesday, Wednesday, and
Thursday.
More stable prices for oil and food will mean less uncertainty
behind the forecasts, but the three indicators this week will reflect
that in different ways.
The Import and Export Prices Indexes for August will be released at
8:30 ET on Tuesday. Increases in import prices will probably be moderate
due to only a small change in petroleum costs, and smaller increases in
items like foods and motor vehicles. Export prices should benefit from
favorable exchange rates and demand for agricultural products.
The Producer Price Index for August at 8:30 ET on Wednesday should
reflect further moderation in input costs, particularly in the easing of
supply constraints related to the earthquake in Japan. Costs of a few
commodities may still be on the rise, like gold, cotton, and tobacco.
The Consumer Price Index for August at 8:30 ET on Thursday should
show that prices for food and energy rose more moderately in the month.
Items in the core index could be a mix. Prices will probably be higher
for shelter, tobacco products, jewelry, apparel, and education. Price
increases for new motor vehicles should be quite modest, while those for
used cars and trucks could be up more substantially. Increases for
medical care have been fairly steady and modest in recent months, and
may remain on trend.
The data for the factory sector could help erase some of the
negative impression from early August after various Fed District Bank
surveys took a sharp downturn.
The Philadelphia Fed’s Business Outlook for September at 10:00 ET
on Thursday comes on the heels of a 33.9 point plunge in the general
activity index to -30.7 in the August report. However, this is a measure
of sentiment, and does not necessarily reflect the underlying activity.
There was a decided drop in new orders and a slowing in hiring, but
that may improve in the September data after the period of heightened
uncertainty that marked the first weeks of August. Much the same story
can be applied to the New York Fed Empire State Survey data when it is
released at 8:30 ET on the same day. Although the decline in the general
activity index was less severe at -7.72 in August from -3.76 in July, it
has also reflected the more intense concerns about economic conditions.
Data on industrial production and capacity utilization in August at
9:15 on Thursday will probably be on the soft side. Milder weather
conditions will ease some utilities output, as well as severe weather
impacts that forced widespread closures of businesses and cut power to
large areas.
Manufacturing could see some declines in motor vehicle production
as factories caught up with demand after the supply chain disruptions
associated with the Japan earthquake. Mining output may decrease as oil
prices declined along with industrial and consumer demand.
The two earliest monthly indexes for consumer confidence will be
released during the week. The IBD/TIPP Economic Optimism Index for
September at 10:00 ET on Tuesday could provide a strong hint about the
direction of the preliminary Reuters/University of Michigan Consumer
Sentiment Index at 9:55 ET on Friday. Consumers are facing more intense
concerns about economic conditions, particularly in regard to the labor
market. Events like Hurricane Irene, the earthquake in Virginia that
affected a wide area, and wildfires in Texas will also add to the gloom.
Still, readings should be slightly higher than those for August.
Initial jobless claims for the week ended September 10 at 8:30 ET
on Thursday will probably include some claims associated with Hurricane
Irene and the consequent widespread flooding that forced closure of
businesses and some public services like schools. The level is still
somewhat elevated and this will add a bit to the total for a week or
two.
The remaining data is relatively old. It will serve to fill out
some blanks, but probably will not add a lot that is fresh to the
picture.
The Treasury International Capital System (TICS) numbers for July
at 9:00 ET on Friday will include the start of the worst of the
uncertainty about the debate over increasing the statutory debt limit.
The current account balance for the second quarter at 8:30 ET on
Thursday, and will largely follow what is already known from the
international trade number. What will be new is the data on remittances
abroad.
Data for state and regional employment in August at 10:00 ET on
Friday will add some detail to what has been reported on a national
level.
The numbers for retail inventories is included in the overall
business inventory report for July at 10:00 ET on Wednesday. The
components for manufacturing and wholesalers will already have been
reported. This will help set the stage for the preliminary third quarter
GDP report.
Central Bank Activity
The press blackout period in advance of the September 20-21 FOMC
meeting begins on Tuesday. Speeches on Monday from Dallas’ Richard
Fisher and St. Louis’ James Bullard will get an extra attentive hearing.
Fisher especially will be watched for any shift in how he perceives the
appropriate monetary policy after his dissent at the last meeting on
August 9. However, both are speaking after market hours. Governor
Tarullo’s appearance later in the week on Thursday should stick to
regulatory issues.
The only major central bank with a routine monetary policy on the
calendar is the Reserve Bank of New Zealand. Its statement will be
released late on Wednesday. The Bank currently has a bias towards
tighter policy, but given the uncertainties in the global financial and
foreign exchange markets, will probably remain on hold for now.
U.S. Treasury Auctions
The U.S. Treasury will auction the next leg of the quarterly
refinancing package with new 3-year notes and reopenings of the 10-year
notes and 30-year bonds. The auctions will take place on Monday,
Tuesday, and Wednesday, respectively. All will settle on Thursday,
September 15. A reopening of 10-year TIPS notes will be announced on
Thursday.
** Stone & McCarthy Research Associates **
[TOPICS: M$$FI$,M$U$$$,MAUDS$]
