Sponsored Links
The uneven nature of the economic recovery has been keeping sentiment subdued in the financial markets. Although emerging economies are pushing ahead in a slow and steady manner towards sustainable growth, data points from the developed economies are showing a see-sawing trend. The primary reason attributed by economists for the sluggish recovery they are foreseeing currently is the ongoing deleveraging in most developed economies and the need for reining in massive governmental budgetary deficits.
Inflation is likely to remain benign over the next few years due to the huge excess productive capacity and high unemployment. That said, we cannot be complacent about inflation, as slower productivity growth will engender faster growth in unit costs, which squeezes margins and places upward pressure on prices.
The lead now seems to be shifting to China and other emerging economies. The argument is well founded given last week's trade data from China, which showed that imports have rebounded to pre-crisis highs. The country is reaping benefits of a competitive exchange rate and earlier announced stimulus measures. The flourishing of the emerging economies bodes well for commodities and therefore the commodity rally, which we saw for much of past year, is likely to continue into the New Year.
Last week, the U.S. retail sales report for December showed a 0.3% decline in sales compared to expectations for a 0.5% increase. Sales, excluding autos, slipped 0.2%, while economists had estimated a 0.3% increase. Stripping off autos and gasoline, retail sales were down 0.3%. Although on the face value, the numbers look weak, when November and December were taken together, sales were in line with expectations due to the upward revisions to the November data.
The consumer price inflation report showed that inflationary pressures are kept well under check. The headline inflation rate was 2.7% in December compared to 1.8% in November. Economists had estimated a reading of 2.8%. The core inflation rate was 0.1%, in line with expectations.
The anxiety among consumers is palpable. The Reuters/University of Michigan's consumer sentiment survey for January showed that the mid-month reading of the consumer sentiment index came in at 72.8 compared to 72.5 in December. Economists had expected a reading of 74. The economic outlook index fell 1.4 points, while the current conditions index climbed 3 points to 81, its highest level since March 2008.
Industrial production got a shot in the arm from colder winter weather in December, with output rising 0.6% month-over-month, mainly aided by a 5.9% jump in utilities output. However, manufacturing output eased 0.1%, although following a 0.9% increase in November. Most categories in the manufacturing sector showed monthly declines, but high-tech production rose 2.4% and business equipment output edged up 0.9%. Capacity utilization rose to 72% from 71.5%, but it is still notably below normal levels.
Meanwhile, the Commerce Department's business inventories report showed a 0.4% gain in November compared to the previous month, a tad better than the 0.3% increase expected by economists.
Manufacturing reading released last week was upbeat, with the New York Fed stating that conditions in the New York region improved in January. The manufacturing index rose to 15.9 in January from 4.5 in December. The new orders index surged up to 20.5 from 2.8 and the shipments index climbed to 21.1 from the month-ago's 8.4. More importantly, the backlog orders index jumped to 2.7 from -21 in the previous month. The 6-month outlook index also rose 3.4 points to 56.
In the Beige Book, the Federal Reserve noted that reports from 12 Fed districts showed that economic conditions improved modestly further despite activity remaining at very low level. Ten districts reported improvement, while Richmond and Philadelphia showed mixed conditions. Consumer spending was reported as higher than 2008 levels in most districts, although found lighter than in 2007. The Beige Book showed steady auto sales and mostly flat or weak tourism activity. While non-financial services generally improved, manufacturing activity increased or held steady.
House prices showed little change, while residential real construction remained at low levels. At the same time, commercial real estate activity remained weak. The Beige Book reported weak credit conditions and generally weak labor market conditions.
Despite the week being abbreviated due to the public holiday on Monday on account of 'Martin Luther King Day', the week's calendar consists of some key market moving economic data. Among the reports scheduled to be released during the week, the Commerce Department's housing starts report for December and the results of the National Association of Homebuilders' January survey and the Philadelphia Fed's January manufacturing survey may assume prominence.
Traders may also closely watch the Conference Board's leading indicators index for December, the Labor Department's producer price index for December and the weekly jobless claims report for further cues on the economic condition. The public announcement of the results of the Treasury auctions of 2 year, 5 year and 7 year notes, all due at 11 AM ET on Thursday, may also be of interest to traders, as the appetite for these instruments are an indicator of investor perception of the inflationary environment and growth.
Housing starts are expected to be almost flat in December and consequently, the annual change is expected to creep into positive territory. The muted expectations for housing starts are due to the unseasonably cold weather across the country. Going forward, the housing sector is likely to be benefited by government tax credit, lower home prices and record low borrowing costs.
Producer prices are also expected to be little changed compared to the previous month, as a rise in natural gas and metal prices is believed to have offset the decline in gasoline prices. However, the sharp decline in energy prices in late 2008 is likely to impact the annual comparisons. The core producer price inflation rate is expected at 0.1%, primarily due to the low capacity utilization exerting downward pressure on inflation.
Tuesday
The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for November at 9 AM ET. Economists estimate the net long-term flows to be $27.5 billion for the month.
The National Association of Homebuilders is scheduled to release the results of its survey on homebuilders' confidence at 1 PM ET.
In December, builder confidence edged down, with the housing market index receding ' point to 16, marking the lowest point since June 2009. According to the National Association of Homebuilders' continued weakness in the economy and job markets weighed on consumers' potential home buying plans. The current sales conditions index eased 1 point to 16 and the index measuring sales expectations slipped 2 points to 26. Meanwhile, the index gauging traffic of prospective buyers remained unchanged for a third straight month.
Wednesday
A report on housing starts, which refer to the number of privately-owned new homes on which construction has been started over some period, and building permits, which are the number of permits issued for new housing units each month, is slated to be released at 8:30 AM ET. Economists estimate housing starts of 575,000 for December.
Housing starts rose 8.9% month-over-month in November to a seasonally adjusted annual rate of 574,000. The reading came in line with expectations, although the previous month's starts were upwardly revised by 2,000.
Single-family housing starts rose 2.1% to 482,000 units. At the same time, building permits, a leading indicator of future construction activity, rose 6%, although they are down 7.3% from the year-ago period.
The U.S. Labor Department is scheduled to release its report on the producer price index for December at 8:30 AM ET. The index measures the average change over time in the prices received by domestic producers of goods and services. Economists expect the headline index to have remained unchanged and the core index to show 0.1% growth.
In November, producer price index rose 1.8% in November following 0.3% growth in October. Economists had been expecting prices to increase by a more modest 0.8%.
At the same time, core producer prices, which exclude food and energy prices, rose 0.5% after the 0.6%decline in October. The increase was much more than 0.2% rise in prices expected by economists.
Thursday
The Labor Department is due to release its customary jobless claims report for the week ended January 16th at 8:30 AM ET. Economists expect a decline in claims to 440,000.
Jobless claims rose 11,000 in 444,000 in the week ended January 9th. Economists had estimated claims to have risen to 437,000 from the originally reported 434,000 for the previous week.
The four-week moving average, which smoothens volatility, fell 9,000 to 440,750. Continuing claims, a statistic that measures the number of people receiving ongoing unemployment help, dropped 211,000 to 4.596 million.
The Conference Board is scheduled to release a report on the U.S. leading index for December at 10 AM ET. The consensus estimate calls for a 0.7% increase in the leading indicators index for the month.
The leading indicators index rose 0.9% month-over-month in November compared to the consensus estimate of 0.7% growth. The index has been showing increases for the eight consecutive months. Additionally, the coincident index, reflecting current conditions, increased 0.2% following an unchanged reading in October.
The results of the Philadelphia Federal Reserve's manufacturing survey are due out at 10 AM ET. Economists expect the diffusion index of current activity to show a reading of 18.8 for January.
The results of the December survey showed that conditions in the sector improved. The manufacturing index rose to 20.4 in December from 16.7 in November, reaching the highest level since November 2005. The new orders index fell to 6.5 from the previous month's 14.8, while the order backlogs index rose to 0 in December from -5.4 in the previous month. The employment index moved into positive territory for the first time since May 2008, rising 6.8 points to 6.3. The inventories index also signaled some improvement from depressed levels. However, the 6-month outlook index declined 12 points to its lowest level since March.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended January 15th at 11 AM ET. The release date is pushed forward by a day from the customary release of day of 'Wednesday' due to the public holiday on Monday.
The oil inventory report for the week ended January 8th, 2010 showed that crude oil stockpiled rose by 3.7 million barrels. With the increase, inventories remained above the upper limit of the average range.
Gasoline stockpiles rose by 3.8 million barrels and remained above the upper limit of the average range. Distillate fuel inventories also increased, rising by 1.4 million barrels. Inventories of distillates were now above the upper boundary of the average range. Meanwhile, refinery capacity utilization averaged 80.4% over the four weeks ended January 8th compared to 80% in the previous week.
Friday
There are no significant economic reports scheduled to be released on Friday.
0 komentar:
Post a Comment