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The Week Ahead

Retail Sales, CPI, Import Prices and Consumer Confidence

Tue, May 13 2008, 06:01 GMT
by BBVA Bancomer Team

BBVA Bancomer

Retail Sales & Excluding Autos (April, Tuesday 8.30 ET)

F: 0.0, 0.1% C: 0.0, 0.2% P: 0.2, 0.1%

We expect retail sales to remain unaltered in April as sales of autos declined and sales at gas stations rose in the month. Excluding autos, sales probably increased 0.1%, mostly inflated by the cost of gasoline. In fact, when adjusted for prices variations, our forecasts depict a gloomier situation than it appears by looking at nominal figures. For instance, when deflated by our CPI forecast, our estimate of total sales decline 0.3%. In 1Q08, real sales decreased by an average monthly rate of 0.1% as consumers struggled with higher commodity prices and weaker labor markets. These trends continue in the second quarter and will probably lead to a decline in total private spending.

Headline CPI & Core (April, Wednesday 8:30 ET)

F: 0.3, 0.2% C: 0.3, 0.2% P: 0.3, 0.2%

Headline CPI and core will remain contained, but this does not mean inflationary risks are nonexistent. Until now, lower labor costs and loss of consumer confidence have helped to contain inflationary pressures. But these pressures -oil, dollar, and now food prices- have intensified, and although most of them have no direct impact in core inflation, the Fed is increasingly worried about their repercussions.

Import Prices Index (April, Tuesday 8:30 ET)

F: 1.5% C: 1.6% P: 2.8%

We expect import prices to have risen during April, albeit at a lower pace than in previous months. Our forecast primarily reflects the observed deceleration in both dollar depreciation and oil price increases. Oil prices rose 6.7% during April (compared to 8.9% during March) and the dollar also depreciated at a lower rate with respect to most currencies. Furthermore, a slowing domestic demand (as seen by trade data released this week) is helping to contain the recent momentum of import price increases.

Empire State & Philadelphia Indices (May, Thursday 8:30 and 10.00 ET respectively)

F: -0.1, -27.0 C: 0.0, -20.0 P: 0.6, -24.9

Regional industrial indices will worsen in May. In our view, firms are likely to scale back production in the next months in order to reduce their relatively high levels of inventories. This development together with the slowdown of consumer spending and the negative contribution of residential investment will lead to a contraction in GDP during the second quarter.

Consumer Confidence (May, Friday 8:30 ET)

F: 60.0 C: 62.6 P: 62.2

The main factors influencing consumers’ sentiment still point to the downside. Gasoline prices keep rising while labor markets continue to loose momentum. Besides these traditional determinants we must add the negative effects of the housing crisis and the financial turmoil. Thus, we expect the U. of Michigan Consumer Confidence Index to edge down to 60 in May, reaching its lowest reading since June 1980.

• Download Full The Week Ahead

Published on  Tue, May 13 2008, 06:53 GMT

Archive

• We expect headline producer prices to increase 0.8% in July
  Published On Mon, Aug 18 2008, 08:38 GMT
• This, in turn, will limit the growth of non-residential investment
  Published On Mon, Jul 21 2008, 09:07 GMT
• Supported by tax rebates and lax monetary policy
  Published On Mon, Jul 14 2008, 09:32 GMT
• PPI, FOMC Minutes, Existing Home Sales, Leading Indicators and Jobless Claims
  Published On Mon, May 19 2008, 10:56 GMT
• Retail Sales, CPI, Import Prices and Consumer Confidence
  Published On Tue, May 13 2008, 06:01 GMT

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http://www.bancomer.com/economica | e.economicos@bbva.bancomer.com