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Weekly Observatory

Wed, Apr 15 2009, 06:12 GMT
by BBVA Bancomer Team

BBVA Bancomer

Headline and Core Producer Price Index (March, Tuesday 8:30 ET)

F: 0.6%, 0.3% C: 0.0%, 0.1% P: 0.1%, 0.2%

Core producer prices are expected to continue to increase steadily, but at a low rate. Even though there is evidence that weakening demand could be putting downward pressure on the prices of crude and intermediate goods, the prices of final goods are expected to remain steady because wages, the producer’s primary cost, are still rising. Headline producer prices, however, are expected to jump by 0.6% due to a large increase in the cost of energy, which will more than compensate for the expected decline in food prices.

Retail Sales and Retail Sales Excl. Autos (March, Tuesday 8:30 ET)

F: 0.7%, 0.6% C: 0.3%, 0.1% P: -0.1%, 0.7%

Total retail sales are expected to increase in March after falling 0.1% in February. Auto sales for the month rose, which will help to boost total sales. In addition, retail sales excluding autos are also expected to rise, driven by widespread increases across most components. Even though the month is expected to yield positive retail sales results, there is still downward pressure on personal consumption due to ongoing job losses and weak consumer confidence.

Headline and Core Consumer Price Index (March, Wednesday 8:30 ET)

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

Core inflation is expected to remain steady but low at 0.1% in March, which would be consistent with our baseline scenario of low, but positive inflation for 2009. Although there are downside risks to core inflation due to the declining economic environment, we expect them to remain contained. Furthermore, the Fed’s expansionary monetary policy will help to limit downward price pressure. In addition, headline consumer prices are expected to increase for the third month in a row, being positively influenced by rising energy prices.

Industrial Production (March, Wednesday 9:15 ET)

F: -1.5% C: -0.9% P: -1.5%

Industrial production is expected to drop for the fifth month in a row as demand remains weak. The manufacturing sector, according to March’s ISM results, is continuing to contract, however, we could see an additional increase in the production of motor vehicles and parts due to the rise in auto sales. Of particular concern is the high tech industry’s accelerating decline in production due to businesses’ lack of investment capital. The continued decline could indicate that non-residential investment will shrink further in 1Q09.

Housing Starts and Building Permits (March, Thursday 8:30 ET)

F: 608M, 569M C: 540K, 549K P: 583M, 564M

Housing starts and building permits are expected to increase again in March, after rising for the first time in eight months in February. The increase is anticipated to be primarily due to construction of condominiums because rental demand has jumped as the economy has deteriorated. However, building permits for single family homes increased slightly in February, which could foreshadow a greater number of housing starts in that sector in the upcoming months.

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Published on  Wed, Apr 15 2009, 06:19 GMT