By Theresa Sheehan
PRINCETON (SMRA) – The week ahead is packed with first tier
economic data, and comes shortly in advance of the next meeting of the
Federal Open Market Committee. As a result, the Committee will have some
fresh information with which to gauge conditions at the mid-point of the
second quarter 2011.
The current batch of softer data is expected to give way to
stronger growth in the second half of the year, but policymakers are
still characterizing the recovery as sluggish or subpar. The mix of data
over the course of the week will provide a broad update on economic
conditions to include consumer spending, inflation, consumer confidence,
manufacturing, and housing.
The May data on retail and food sales 8:30 ET Tuesday leads off the
major reports for the week. The numbers are likely to look soft due to
slowing rises in gasoline prices that will moderate the pace of service
station sales, and the declines in motor vehicle sales that were in part
from limited inventories of the most sought-after models.
Other types of retailers may have a somewhat better performance. At
this time of year sales generally increase for building materials and
gardening equipment. Warm weather probably means seasonal merchandise
did well at department and apparel stores.
The release of some new games for the most popular videogame
consoles should have helped at electronic specialty stores. Slow
activity in housing probably restrained sales of household appliances
and furniture.
The May Producer Price Index will also be released Tuesday at 8:30
ET, while the Consumer Price Index is set for 8:30 ET Wednesday. The
back-to-back inflation reports will be influenced by the same factors.
Moderation in some food prices and for fuels will likely mean the
headline numbers will see smaller increases this month after some fairly
sharp rises in March and April.
Outside of food and energy, gains in other commodities will be less
visible as well. There may be some upside risks to prices for motor
vehicles as demand for fuel-efficient passenger cars was higher even as
supplies were smaller.
Release of the June preliminary Reuters/University of Michigan
Consumer Sentiment Index at 9:55 ET Friday may signal some improvement
in consumers’ outlook. The IBD/TIPP Economic Optimism Index for June was
up nearly two points to 44.6, and it often leads the direction for the
more closely watched Michigan survey.
The NAHB/Wells Fargo Housing Market Index for June will be released
mid-morning Wednesday. The index reading has been 16 in six of the last
seven months, and probably will remain on trend for one more round.
Demand for new housing is stagnant.
Data on housing starts and building permits issued for May is
scheduled for 8:30 ET Thursday. While the multi-unit component has been
volatile, the levels of single-family starts have told a consistent
story of a nearly year-long period of little variation near record lows.
Data for manufacturing could provide a hint as to whether the
Japan-related supply chain disruptions and weather impacts in May will
be of brief duration, or if there will be prolonged effects.
The two earliest reads for the factory sector in June are the New
York Fed’s Empire State Survey at 8:30 ET Wednesday, and the
Philadelphia Fed’s Business Outlook at 10:00 ET Thursday. Recent reports
were mixed in the last few months, but on the whole showed slower
activity and expectations for the longer-term outlook.
The numbers for industrial production and capacity utilization in
May at 9:15 ET Wednesday are likely to be of a piece with the more
disappointing performance already reported in the manufacturing indexes
for that month. Utilities output may have risen with the warmer weather,
and mining is likely to continue to see some gains. However,
manufacturing will still be restrained.
Initial jobless claims data for the week-ended June 11 will
probably start to show some easing in levels as the higher filings from
weather impacts begin to ebb.
The remainder of the economic indicators should be overshadowed by
the more important data, and will probably mainly confirm what is
already known about economic conditions.
The only new information in the April business inventories report
at 10:00 ET Tuesday will be the retail component. Inventories were
already reported up 1.3% for manufacturers and 0.8% for wholesalers.
The Treasury International Capital System data for April Wednesday
morning will provide detail on demand for U.S. debt and equities abroad
in the early part of the second quarter.
The Current Account balance for the first quarter 2011 should
follow the lead of the data for the international trade deficit. The
numbers will add in the performance of remittances abroad.
The Conference Board’s Leading Economic Index for May will be for
another month of modest gains in economic activity as the recovery winds
up a second year of subpar gains.
Data on state and regional unemployment for May at 10:00 ET will
add some nuance to what is known after the national report, but will not
change the underlying picture for the labor market.
The only major central bank with a scheduled policy announcement
next week is the Bank of Japan. Its Policy Board meets Monday and
Tuesday. The BOJ is expected to maintain its easing bias, although it
probably will not take any specific actions to provide more
accommodation.
Richmond Fed President Jeffrey Lacker will be speaking in Roanoke,
Va. Monday about manufacturing. After that, the public engagement
calendar is quiet until after the FOMC meeting on June 21-22. Chairman
Bernanke’s speech Tuesday has set market expectations for the meeting’s
outcome for monetary policy to remain on hold for now.
The U.S. Treasury will announce a reopening of the 30-year TIPS
bonds, to be auctioned on the following Thursday, and t settle on June
30.
The Treasury is currently using extraordinary measures to keep from
breaching the statutory debt limit. This may have an impact on the
announced sizes of the offerings of bills and/or coupons in the coming
weeks.
** Stone & McCarthy Research Associates **
[TOPICS: M$$FI$,M$U$$$,MAUDS$]