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The Week Ahead

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RS, Headline Consumer Prices Index & Core, IP, CS, and FOMC Minutes

Tue, Oct 13 2009, 08:40 GMT
by Marcial Nava

BBVA Bancomer

Retail Sales (September, Wednesday 10:00 ET)

F:-1.7% C: -2.1% P: 2.7%

Retail sales likely declined in September as the temporary effect of the Cash for Clunkers program diminishes. Domestic auto sales fell 34.7% in September, following a 25.2% increase in August. Furthermore, retail sales excluding autos may be rebounding; we expect a slight positive increase, as several large retailers reported positive increases in September same store sales last Thursday. For 3Q09, we expect a 1.8% total increase in retail sales.

Headline Consumer Prices Index & Core (September, Thursday 8:30 ET)

F: 0.3, 0.1% C: 0.2, 0.1% P: 0.4, 0.1%

Increases in September energy prices are expected to result in a monthly rise in headline inflation, slowing the index’s decline on a year-over-year basis. Meanwhile, core inflation will remain low but positive; however, ongoing economic slack, which can be seen in the form of the high unemployment rate, low capacity utilization and declining wages, will continue to emit downward pressure on prices.

Industrial Production (September, Friday 9:15 ET)

F: 0.0% C: 0.1% P: 0.8%

Industrial production is expected to remain flat. Domestic demand remains weak and the August increase was partly driven by the spike in auto sales due to the now expired Cash for Clunkers program. While the manufacturing ISM registered just above 50 for the second consecutive month (indicating expansion, but at a lower rate than August), the Chicago PMI registered a 4.1% decrease in September and remains below 50 (thus indicating contraction).

Consumer Sentiment (October, Friday 9:55 ET)

F: 72.0 C: 73.0 P: 73.5

The University of Michigan Consumer Sentiment Index is expected to remain flat or post a slight decrease in October. While several recent economic indicators point to signs that the contraction is easing, the recent surprise announcement of higher than expected job losses in September and continuing high level of unemployment claims. The ongoing weakness in the labor market will limit a rapid increase in this index. This index partially indicates slow growth in the consumption component of GDP.

FOMC Minutes (Wednesday 14:00 ET)

We expect the economic assessment from the FOMC members to focus on their concerns in the Commercial Real Estate market. Furthermore, we expect more detailed discussion of exit strategies from the monetary easing that has occurred to restore liquidity to credit markets once the economy shows signs of sustained improvement. We continue to expect the Fed funds rate to remain low into 2010, as the weak labor market will likely contain inflationary risks.

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Published on  Wed, Oct 14 2009, 11:04 GMT