Retail Sales, excluding Transportation (October, Monday 8:30 ET)
F: 0.8%, 0.4% C: 0.9%., 0.4% P: -1.5%, 0.5%
After adjusting downward in September due to the end of the Cash for Clunkers program, retail sales are expected to rise in October, reflecting modest strengthening in consumer demand. Auto sales are expected to provide a boost, given their jump to 10.45M vehicles from 9.2M. Nevertheless, looking forward, retail sales are expected to remain subdued given the labor market weakness that continues to weigh on consumer spending. The unemployment rate rose to 10.2%, the highest since April 1983, and non-farm payrolls are continuing to decline. Uncertainty in the labor market, coupled with tight credit markets, will limit consumer spending in 4Q09 and 2010.
Industrial Production (October, Tuesday 9:15ET)
F: 0.9% C: 0.4% P: 0.7%
Industrial production is expected to rise for the third consecutive month in October, indicating that economic activity is continuing to pick-up. Leading indicators of production, such as the ISM manufacturing index and new orders of durable goods have risen of late, indicating that gains experienced in the third quarter will continue into the fourth. Furthermore, additional production activity in the high-tech sector could indicate that business spending on equipment and software could increase further in 4Q09, easing the decline in non-residential investment.
Consumer Price Index (Headline, Core) (October, Wednesday 8:30 ET)
F: 0.2%, 0.1% C: 0.2%, 0.1% P: 0.2%, 0.1%
Headline inflation will receive support from rising energy prices in October, easing its decline. Meanwhile, core inflation is expected to remain low but positive, consistent with its trend over the past twelve months due to subdued demand and the weak labor market. The high unemployment rate is exerting downward pressure on wages, as employers have a larger applicant pool. Furthermore, with weak demand in a competitive environment, many firms choose not to raise their prices. The abundant slack in the economy helps to buffer inflationary pressures from the fiscal stimulus and monetary easing; thus, we maintain our forecast of positive, low inflation into 2010.
Leading Indicators Index (October, Thursday 10:00 ET)
F: 0.8% C: 0.4% P: 0.1%
The Leading Indicators Index (LEI) is forecasted to rise in October, pointing to growth in the economy for the seventh consecutive month. The index will receive a positive contribution from the majority of components. Initial jobless claims slowed, while manufacturers’ new orders of consumer and capital goods rose. Furthermore, the pick-up in manufacturing activity drove average weekly hours up to the highest level since November 2008 and building permits are expected to rise. A 2.2% increase in the average stock price in the S&P500 will provide a further boost, but the drop in consumer expectations to 65.7 from 73.5 will subtract from the index. Further growth in the index could indicate that the economy will expand in 4Q09, which is in line with our baseline forecast; nevertheless, many of the index’s components remain at levels below those of last year, pointing to ongoing economic weakness.
