Photo: ルーク.チャン.チャン on flickr
This week was quite spare on the data front.Not so next week.
Here’s Deutsche Bank (which, oddly, writes these notes from the perspective of the next day, so imagine you’re reading this on Monday).
Commentary for Monday: Following last week’s sparse data docket, the week ahead will be highlighted by a number of important releases commencing with the December FOMC meeting and retail sales. We do not expect any material changes in tomorrow’s FOMC statement as policymakers’ concerns regarding the labour outlook probably intensified in light of the meager 39k payroll gain and two- tenths backup in the unemployment rate subsequently reported. Additionally, November retail sales will be the last piece of data the Fed will see prior to the conclusion of tomorrow’s meeting. On the margin this could have a minor effect on the tone of the FOMC statement if sales were to grow materially above our current expectations of 0.6% month-on-month in the headline, and 0.7% growth ex-autos. Anecdotal evidence has suggested that Black Friday sales were robust, but more importantly, the trend in initial jobless claims, which is significantly correlated with retail sales, has been supportive.
Next to employment, the other main concern of the Fed is the threat of deflation. We continue to believe that we are nearing an inflation inflection as core CPI has now fallen to its lowest level of year-on-year growth in the history of the series. Our analysis has shown that on average over the past 50 years, CPI ex-food and energy troughs approximately 30 months after the previous cycle peak. Core inflation peaked at 2.93% over four years ago (Sept. 2006) and given the depth of the current downturn, it is not surprising that we have far exceeded the historical norm. However, Tuesday’s PPI data should continue to show evidence that pressure is building in the inflation pipeline as we expect headline prices to rise 0.5% and core prices to increase 0.2%. Stronger employment income creation in a healthier labour market will increase the ability of producers to pass higher input costs along to consumers. To that end, we expect headline CPI on Wednesday to increase 0.2% in November with core prices rising a modest 0.1%.
The industrial production data this week (Wednesday) will cover the November period, while the NY Fed Empire (Wednesday) and Philly Fed (Thursday) surveys will give us the latest read on December manufacturing. We expect all three to remain positive with IP up a modest 0.4% m/m, the NY Empire index rising to 10.0 from -11.1 last month and the Philadelphia Fed index should be 15.0, down from last month’s 22.5. Additionally, the architectural billings index leads us to believe residential construction may be bottoming. We expect housing starts (Thursday) to rise to 0.530M from 0.519M previously, with permits likely flat.
Finally, the conference board will release its November index of leading indicators which has been the subject of some debate as the y/y rate of growth has been begun to level out since peaking in April. We are not concerned as our expectation of 1.1% sequential growth in the LEI would keep the annualized rate of growth well above 6%. We would only have reason to fret in the event that this series were to go negative on an annualized basis. This appears unlikely at
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.