Empire State Manufacturing Index (February, Tuesday 8:30 ET)

Forecast: 18.7 Consensus: 17.7 Previous: 15.9

After declining for fifteen straight months, manufacturing activity in the New York Fed’s territory has been expanding for the past six months according to the Empire State Manufacturing Index. The index is expected to climb to 18.7 in February, indicating the recovery in manufacturing is continuing into 2010. Given this result, we could expect to see a rise in February’s ISM Manufacturing Index as well.


Housing Starts (January, Tuesday 8:30 ET)

Forecast: 568K Consensus: 580K Previous: 557K

After slipping 4.0% in December, housing starts are expected to rebound to 568K in January, as indicated by the previous month’s 10.9% increase in building permits. Construction of single family homes is driving the improvement in housing starts. This variable has risen to levels 16.0% above those of the previous year. On the other hand, even though construction of multi-family homes has increased in the past few months, it remains 38% below that of last year. Residential investment is expected to improve further in 1Q10, but at a slow pace.


Industrial Production (January, Tuesday 9:15 ET)

Forecast: 0.6% Consensus: 0.8% Previous: 0.6%

Industrial production is expected to rise for the seventh month in a row. In fact, production levels are forecasted to post a year-over-year increase for the first time since March 2008. The additional increase in activity could indicate that demand is continuing to pick-up early in 2010. In particular, industrial production of high tech goods is expected to post its second consecutive year-over-year increase, which would point to further recovery in non-residential investment in equipment and software in 1Q10.


FOMC Statement (Wednesday 14:00 ET)

Forecast: 0.0%-0.25% Consensus: 0.0%-0.25% Previous: 0.0%-0.25%

The FOMC is not expected to announce any significant policy changes following this month’s meeting. Coming a week after Bernanke’s testimony detailing the tools for the exit strategy, the meeting will most likely focus on how to structure and implement the exit. Although the economy continues to improve, significant slack remains, which will warrant maintaining the current target fed funds rate and the “extended period of time” language.


Consumer Price Index (Headline, Core) (January, Friday 8:30 ET)

Forecast: 0.2%, 0.1% Consensus: 0.3%, 0.2% Previous: 2.7%, 1.8%

Rising energy prices are expected to boost headline inflation in January, but other inflationary pressures will remain subdued. Even though economic activity is improving, it is emerging from levels so low that economic slack is still prevalent. This is evidenced by the high unemployment rate, low capacity utilization and sluggish wage growth. Furthermore, inflation expectations remain stable. As a result, we expect core inflation to remain low, but positive moving into 2010.