Sponsored Links
Skepticism concerning recovery has been the fundamental factor driving markets lower in recent sessions. The Greek debt crisis is the most recent concern haunting traders, as they fear that even a small imbalance in some part of the globe has the potential to morph into a systemic crisis, given the delicate nature of the recovery that has taken shape. Despite the premonitions, the economy has shown signs of moving into a trajectory leading to a slow and steady recovery.
Most economists expect the economy to vindicate itself creditably in 2010. If the 5.7% growth in the fourth quarter is any indication of things to come, we can be rest assured that GDP growth would be above trend around 3.5%-4% for the whole of 2010. MF Global Markets forecasts healthy economic growth, a clear pick up in the labor market and tame inflation for the year. Labor market recovery is expected to be robust, given the fact that orders and production fell sharply in the current recession and the drop in payrolls was far bigger than normal.
Spending growth has resumed after the precipitous drop seen during the thick of the crisis in the second half of 2008. After declining at a 3.5% seasonally adjusted annual rate in the third quarter of 2008, personal consumption expenditure has gradually recovered and rose at a decent 2.8% clip in the third quarter of 2009 and 2% in the fourth quarter of 2009. That said, it could take more time for spending to recover to its long-term trend like levels.
With consumers resuming spending, the need for businesses to cut inventories reduced. According to recent BEA estimates, inventories, despite declining, added 3.9 percentage points to fourth quarter growth due to the slowdown in the rate of inventory depletion. Economists expect inventory growth to resume and accelerate in the next several quarters, boosting GDP even further.
Among last week's reports, retail sales report of the Commerce Department showed a 0.5% month-over-month increase, while sales excluding autos were up 0.6%. Both readings came in slightly above expectations. The numbers weren't surprising, given the fact that January is both a clearance month and gift card redemption month. Sales showed strength when compared to the same period last year, with the headline number and sales, excluding autos, showing 3.2% and 3.4% growth, respectively. However, core annual retail sales growth, measured as sales excluding autos and gasoline were anemic at 0.9%.
Meanwhile, the mid-month reading of the University of Michigan's consumer sentiment survey showed that the consumer sentiment index edged down 0.7 points to 73.7 in February, marking the first decline in 3 months. The expectations index fell 3.5 points, boding ill for consumer spending in the months ahead, while the current conditions index rose 3 points to 84.1.
The Commerce Department said business inventories edged down 0.3% in December, weighed down by a 0.8% decline in wholesale inventories. Retail inventories were more or less unchanged. However, business sales edged up 0.9%, rising for the seventh consecutive month.
Prepared text of Federal Reserve Chairman Ben Bernanke's planned testimony to the House Financial Services Committee, which was postponed due to snow, released last week showed that the central banks feels that the U.S. economy needs accommodative monetary policies at present, although it is of the view that financial conditions should be tightened at some point by raising short term interest rates and reducing the quantity of bank reserves outstanding.
While noting that the Term Auction Facility (TAF) and Term Asset-Backed Securities Loan Facility (TALF) along with the regular discount window are the only facilities that are still in operation to provide credit to multiple institutions, Bernanke said the Fed will reduce the maximum maturity of discount window loans to 28 days from 90 days and also will consider a modest increase in the spread between the discount rate and the target funds rate.
Outlining some of the tools for mopping up the additional liquidity, the Fed Chairman said the central bank would consider reverse repurchase agreements. Additionally, the Fed seems to be contemplating offering depository term deposits, which are similar to the CDs that depository institutions offer their customers.
Although the unfolding week was shortened by Monday's public holiday, the week's calendar is loaded with fairly important economic reports that could improve visibility on economic recovery. The Federal Reserve's industrial production report for January, the weekly jobless claims report, the Commerce Department's housing starts report for January, the National Association of Homebuilders' housing market index for February, the FOMC minutes and the results of the manufacturing surveys of the New York and the Philadelphia Feds are among the market moving economic reports scheduled to be released during the week.
Also in focus would be the consumer and producer price inflation reports for January, the Labor Department's export and import price index for January and the Conference Board's leading economic indicators for January. Traders may also stay tuned to the Fed speeches scheduled to be delivered during the week and announcements concerning the Treasury auctions of 2- year note, 5-year notes, 7-year notes and 30-year TIPS, all due at 11 AM ET on Thursday.
Among the housing data, the housing starts report is likely to show an increase in starts due to a positive payback effect from inclement weather conditions in December. However, building permits may most likely decline due to a jump in December. Although home construction has stabilized, recovery is still proving elusive, as builder confidence regarding sales prospects remains muted, preventing a meaningful rebound.
Going by the Institute for Supply Management's manufacturing purchasing managers' index and an 11,000 increase in manufacturing payrolls in January, manufacturing output could remain solid, lending support to January's industrial production. However, utility output should reverse most of its weather-related sharp increase seen in December. Capacity utilization should increase slightly, in line with recent trend.
With Bernanke outlining the Fed's thinking on exit plan last week, the minutes of the January FOMC meeting may appear redundant. The Fed has resigned itself to the fate of keeping rates at extremely low levels for an extended period. Danske Bank is of the view that the focus will be on whether Kansas City Federal Reserve President Thomas Hoenig's dissent enjoyed sympathy among other voting committee members. The firm is of the view that the economic forecasts of the Fed will be slightly more optimistic compared to its projections in early November.
Monday
The markets were closed on Monday on account of 'Presidents Day' public holiday.
Tuesday
The results of the New York Federal Reserve's empire state manufacturing survey, which elicits response from 200 manufacturing executives in New York state, is slated to be released at 8:30 AM ET. The headline general business conditions index for February is expected to come in at 18.
Conditions in the New York region improved in January, with the manufacturing index rising 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.
The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for December at 9 AM ET. Economists estimate the net long-term flows to be $50 billion for the month.
Minneapolis Federal Reserve Bank President Narayana Kocher Lakota is due to speak to the Minnesota Bankers Association in St. Paul at 12:45 PM ET.
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 580,000 for January.
New residential construction showed a notable decrease in the month of December, with housing starts falling by 4% to an annual rate of 557,000 in December from the revised November estimate of 580,000. Economists had been expecting starts to edge down to 572,000 from the 574,000 originally reported for the previous month.
The export & import price indexes for January, which gives the changes in the prices of non-military goods and services traded between the U.S. and the rest of the world, are due out at 8:30 AM ET.
Import prices remained unchanged in December compared to the previous month, according to a separate report released by the Labor Department. In November, the index had risen a revised 1.6%. The 1.4% decline in petroleum import prices was offset by a 0.4% increase in the prices of non-fuel imports.
At the same time, export prices grew at a 0.6% rate compared to a 0.9% increase in November. Prices of agricultural exports climbed 4%, while export prices of non-agricultural commodities rose 0.6%.
The industrial production report of the Federal Reserve is due out at 9:15 AM ET. Economists estimate that industrial production rose 0.8% in January, while capacity utilization is expected to come in at 72.6%.
In December, industrial production got a shot in the arm from colder winter weather, 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.
The Federal Reserve is scheduled to release the minutes of its January 26th-27th meeting at 2 PM ET.
As expected, following the end of its January meeting the Federal Reserve announced its decision to keep interest rates unchanged at 0%-0.25% at its December meeting. However, the decision was not unanimous, unlike last time, with Hoenig voting against the decision. The post-meeting policy statement showed that the central bank now views growth as 'strengthening' as opposed to its earlier stance that growth is picking up. The Fed's commentary on household spending expanding at a moderate pace was also said with more conviction this time around.
The description about economic condition was altered, with the central bank now suggesting moderation in the pace of economic recovery for some time, while earlier it saw weak economic activity. At the same time, the inflation outlook was maintained. Citing low resource utilization levels, subdued inflation trends and stable inflation expectations, the Fed repeated its commitment to maintain the fed funds rate at exceptionally low levels for an extended period.
Thursday
The U.S. Labor Department is scheduled to release its report on the producer price index for January 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 show 0.8% growth and the core index to show 0.1% growth.
The producer price growth for December came as a surprise to economists, as food prices showed a notable increase offsetting a drop in energy prices. The producer price index edged up by 0.2% in December following an unrevised 1.8% increase in November. Economists had been expecting prices to come in unchanged after the sharp jump in the previous month.
Excluding the changes in food and energy prices, core producer prices were unchanged in December after increasing by 0.5% in the previous month. Core producer prices had been expected to edge up by 0.1%.
The Labor Department is due to release its customary jobless claims report for the week ended February 13th at 8:30 AM ET. Economists expect a decline in claims to 430,000.
First-time claims for unemployment benefits fell by much more than expected in the week ended February 6th. Initial jobless claims fell to 440,000 from the previous week's revised figure of 483,000. Economists had been expecting jobless claims to slip to 465,000 from the 480,000 originally reported for the previous week.
The Conference Board is scheduled to release a report on the U.S. leading index for January at 10 AM ET. The consensus estimate calls for a 0.5% increase in the leading indicators index for the month.
The U.S. leading economic indicators index for the U.S. rose 1.1% in December following a 1% increase in November and a 0.3% rise in October. With this, the index has risen steadily for nine consecutive months. While the coincident economic index rose 0.1%, the lagging index fell 0.2%.
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 17 for February.
In January, the manufacturing index fell to 15.2 from 22.5 in December. The new orders index dipped 5.1 points to 3.2, while the employment index rose 1.6 points to 6.1. The inventories index, although improving to -1.6 from the previous month's -5.7, remained in negative territory. The 6-month outlook index rose to 43.3 from 35.9.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended February 12th 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.
In the week ended February 5th, crude oil stockpiles rose by 2.4 million barrels to 331.4 million barrels. Gasoline inventories increased by 2.3 million barrels to 230.4 million barrels, while distillate stockpiles edged down by 0.3 million barrels to 156.2 million barrels. Refinery capacity utilization averaged 78.4% over the four weeks ended February 5th compared to 79% in the previous week.
Federal Reserve Governor Elizabeth Duke is scheduled to appear at dinner of the CFA Virginia and the Economics Club of Hampton Roads for the annual Economic Impact Award in Norfolk, Virginia at 5 PM ET.
Atlanta Federal Reserve Bank President Dennis Lockhart is also scheduled to speak on the economic outlook to the Augusta Metro Chamber of Commerce in Augusta at 7 PM ET. Also due to speak on that day is St. Louis Federal Reserve Bank President James Bullard, who will speak on the U.S. economy to the Economics Club of Memphis in Memphis, Tennessee at 9 PM ET.
Friday
The consumer price index for January is scheduled to be released at 8:30 AM ET. The index is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The consensus estimates call for a 0.3% increase in the headline consumer price index, while the core consumer price index that excludes food and energy is expected to show 0.2% growth.
Consumer prices showed a 0.1% month-over-month increase in December, slower than the 0.4% increase in November and the 0.2% increase expected by economists. The core consumer price index also rose at the same 0.1% rate, in line with economists' expectations.
The slowdown was due to the easing in the rate of increase in energy prices to 0.1% from 4.1% in the previous month. However, food price inflation accelerated to 0.2% from 0.1%.
0 komentar:
Post a Comment