US Economics Week Ahead: Retail Sales will set the Pace

The last full week in November brings with it its fair share of economic data, Fed talk, and a few important earnings stragglers.  The general themes of the week will be housing, manufacturing, inflation, and the consumer.  On the economic front, October’s retail sales—released on Monday—should steal the show, followed up by October’s industrial production data on Wednesday.  Other important indicators include Monday’s empire state manufacturing survey and business inventories, Tuesday’s PPI and TIC data, Wednesday’s CPI and housing starts report, and finally Thursday’s jobless claims and leading economic indicators release.  On the earnings front we can expect to hear from Home Depot, Lowes, Dell, GM, Gap, and Target.  Bernanke will be providing the week’s most critical ‘Fed chatter’, with his speech to the Economic Club of New York on Monday, which some believe could have implications for the dollar.

Here is the rest of this week’s US calendar:

Monday, Nov. 16

8:30 a.m. EST: October’s Retail Sales (Risk: Neutral, Market Reaction: Significant): After dropping 1.5% in September, primarily due to the expiration of the ‘Cash for Clunkers’ program, retail sales should have experienced a modest jump in October, partially on the back of higher auto sales.  Vehicle sales likely picked up during the month after falling 10.4% in September. The current Bloomberg consensus forecast for retail sales is an increment of 0.9%, while retail sales ex-autos is expected to rise 0.4%, after rising 0.5% in September.

8:30 a.m. EST: November’s Empire State Manufacturing Survey (Risk: Neutral, Market Reaction: Moderate): The New York Fed manufacturing index will likely experience a modest pullback after reaching a five year high in October.  Nevertheless, the index should remain well above its breakeven point of 0.  The current Bloomberg consensus forecast is for a reading of 29.0, versus 34.6 in October.  As always I recommend paying close attention to the forward looking new orders index, along with the employment and prices paid index for hints toward the labor market and inflation story.

10:00 a.m. EST: September’s Business Inventories (Risk: Neutral, Market Reaction: Marginal): The rate at which businesses are reducing inventories is anticipated to decline in September, albeit remain negative.  September will be the 14^th consecutive month business inventories have decline.  Inventories declined -1.5% in August, but should be down a more modest 0.8% in September.  Auto inventories could be up slightly for the month as car dealers complete a limited restocking due to a jump in sales from the ‘Cash for Clunkers’ program

12:00 p.m. EST: Ben Bernanke, Fed Chairman, speaks to the Economic Club of New York

1:15 p.m. EST: Richard Fisher, Dallas Fed President, will discuss US economy and central bank at a community forum hosted by the District Bank in Dallas, TX

6:15 p.m. EST: Donald Kohn, Fed Vice-Chairman, will be participating in Northwestern University’s Kellogg Distinguished Lecture Series discussing “Federal Reserve Policy Challenges.”

Tuesday, Nov. 17

7:45 a.m. EST: ICSC-Goldman Store Sales (Risk: Neutral, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales.  Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure.  Last week’s number indicated a weekly decline of -0.1% in store sales compared to a gain of 0.1% a week prior—this was the first decline in six weeks.

8:30 a.m. EST: October’s Producer Price Index (Risk: Neutral, Market Reaction: Moderate): Rising food and energy prices during the month will likely lead to a significant increment in headline PPI.  Factoring out these volatile components the core-PPI should experience a more modest gain of around +0.1%.  The current Bloomberg consensus forecast for headline PPI is an increment of +0.5%, versus a decline of -0.6% a month prior.

8:55 a.m. EST: Redbook (Risk: Negative, Market Reaction: Marginal): The Redbook is a weekly measurement of chain stores, discounters, and department store sales.  This indicator tends to be less significant than the ICSC-Goldman Store Sales in forecasting retail sales.  According to the Redbook store sales were rose 1.7% last week on a year over year basis.

9:00 a.m. EST: September’s Treasury International Capital (TIC) Data (Risk: Neutral, Market Reaction: Moderate): This report highlights the flow of financial instruments to and from the U.S. It indicates foreign demand for U.S. financial instruments and thus tends to have a stronger impact on the dollar and the bond markets than it does on equities.  But, given the recent record levels for treasury auctions, it will be interesting to monitor foreign demand for US debt.

9:15 a.m. EST: October’s Industrial Production (Risk: Neutral, Market Reaction: Significant): After rising 0.7% in September, industrial production could face some pressure in October due to weakness in manufacturing, however, this weakness could be at least partially offset by utility output during the month.  On the manufacturing side, the expiration of the ‘Cash for Clunkers’ program should continue to adversely impact auto manufacturing, while manufacturing hours worked during the month also fell.  The current Bloomberg consensus is for an increment of +0.4%, compared to September’s growth of 0.7%.

10:00 a.m. EST: Jeffrey Lacker, Richmond Federal Reserve Bank President, is giving a speech on the economic outlook in Richmond.

1:00 p.m. EST: November’s Housing Market Index (Risk: Neutral, Market Reaction: Marginal): The extension of the first time home buyer tax credit should help bolster the NAHB/Wells Fargo housing market index, which fell to 18 in October.  This release could also provide a good lead in for the housing starts and permit data being released a day after.

12:30 p.m. EST: Sandra Pianalto, Cleveland Fed President, will give a speech at the 11th Annual Ohio Housing Conference

Wednesday, Nov. 18

7:00 a.m. EST: MBA Mortgage Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index.  Applications rose last week 3.2% after gaining 8.2% a week prior.  Last week’s overall increment was due entirely to a jump in refinance applications, which rose 11.3%, while the purchase index fell 11.7%.  A wave of buyers, filling out multiple mortgage applications, that were looking to take advantage of the first time home buyer tax credit–originally set to expire on Nov. 30th–have already completed their transactions, thereby reducing the current demand for mortgages.    However, the recent extension of the first time home buyer tax credit should eventually bring a new set of buyers into the market, which could help support the purchase index over the coming months–don’t forget buying a house can be a long drawn out process.   Nevertheless, increased lending standards for FHA loans, due to the organizations worsening finances, could place some headwinds on the purchase index’s recovery.

8:30 a.m. EST: October’s Consumer Price Index (Risk: Neutral, Market Reaction: Significant): Consumer prices in October likely experienced a modest rise on the back of higher food and energy prices, after rising 0.2% in September.  Core-CPI should remain relatively tame, with increasing auto prices potentially placing some upward pressure on the index.  Interestingly, residential rent and owners’ equivalent rent both declined by -0.1% in September—according to the BLS this is only the second time a decline of this magnitude has occurred.   The current Bloomberg consensus forecast is for an increase of 0.2% in the headline number and 0.1% for the core.

8:30 a.m. EST: October’s Housing Starts (Risk: Neutral, Market Reaction: Moderate): Housing starts and permits should continue to gain some momentum as the inventory of homes for sales continues to moderate.  It will be important to monitor multi-family housing starts, which has been a volatile component compared to single family starts—single family starts have been positive for every month since March, excluding August. The current Bloomberg consensus forecast is for an increase in starts to 600K from 590K a month prior.

9:15 a.m. EST: James Bullard, St. Louis Federal Reserve Bank President, will discuss the US economic outlook at the Commerce Bank Economic Breakfast in Clayton, MO.

10:30 a.m. EST: EIA Petroleum Status Report (Risk: Neutral, Market Reaction: Moderate): This report measures US domestic petroleum inventories.  Large unanticipated swings in this index could have a significant impact on energy prices.  Last week this report showed a gain of -1.8 million barrels versus a decline of -4.0 million barrels a week prior.

Thursday, Nov. 19

Charles Plosser, Philadelphia Federal Reserve Bank President, will be speaking at the Global Interdependence Center conference on food and water in Singapore.

8:30 a.m. EST: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims fell last week by 12K to 502K, after falling 20K a week prior. I should note there is a potential for initial jobless claims slip below 500K this week, which would assuredly invoke numerous headlines.  Nevertheless, despite second derivative improvements these levels still indicate continued losses for monthly payrolls—albeit at a slower pace—coupled further deterioration to the unemployment rate, which has already exceeded 10%. The current Bloomberg consensus forecast is expecting claims to come in at 505K, essentially unchanged from last week.

10:00 a.m. EST: October’s Leading Indicators (Risk: Neutral, Market Reaction: Moderate): October’s leading indicator index will likely show its seventh consecutive month of positive readings.  The current Bloomberg consensus forecast is expecting a +0.4% rise for the month, compared to a +1.0% increment in September.  The biggest positive contributions for the index will likely come from the yield curve, initial jobless claims, and stock prices, while the University of Michigan’s consumer expectations index should be the largest negative factor.

10:00 a.m. EST: November’s Philadelphia Fed Survey (Risk: Negative, Market Reaction: Moderate): Recent weakness in the Philly Fed’s expectations index may catch up with the current conditions index potentially placing some pressure on November’s headline number.  Nevertheless, the current Bloomberg consensus forecast is for a reading of 12.0 compared to 11.5 in October.

10:30 a.m. EST: EIA Natural Gas Report (Risk: Neutral, Market Reaction: Moderate): This report highlights domestic natural gas inventories, which could have a significant impact on the energy sector.

4:30 p.m. EST: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness.  The market will pay close attention to the reserve bank credit component, which measures factors supplying   providing reserves into the banking system.  The Fed’s balance sheet fell slightly last week to US$2.117trn from US$2.147trn a week prior.    The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help moderate long-term interest rates.

4:45 p.m. EST: Richard Fisher, Dallas Federal Reserve Bank President, will give the closing address to the Cato Institute’s annual monetary policy conference in Washington

Friday, Nov. 20

Charles Plosser, Philadelphia Federal Reserve Bank President, will be speaking at the Global Interdependence Center conference on food and water in Singapore.

Enjoy the weekend!