Merk Economic Calendar: Week Ahead in U.S. Financial Markets (September 8 - September 12 2008)
Financial Markets Summary For The Week of September 8-12
The week of September 8-12 will see a heavy week of US macro data. Inflation will be at the forefront with import prices and producer prices released on Thursday and Friday, while the advance retail sales estimate for August to close out the week figures to be the primary market moving release of the week. The week will kick off with the Tuesday publication of the July pending home sales release. The majority of the data for the week will be published on Thursday, which will also see the release of the July trade balance, weekly jobless claims and US monthly budget statement. Friday will also see the publication of the University of Michigan's preliminary estimate of consumer sentiment for September.
Fed Talk
The only Fed speaker scheduled for the week is FRB Dallas President Fisher,
who will speak in Austin, Texas, topic and time TBA on Monday, September
8. The remainder of the week falls under the traditional blackout period
on Fed talk ahead of the September 16 FOMC meeting.
Pending Home Sales (July) Tuesday 10:00 AM
Pending home sales for July should fall -1.3% after a strong 5.3% uptick in
June. The modest increase in sales activity during the summer months of 2008
has been fueled by purchases of foreclosed homes in the existing stock of
houses. According to the National Realtors Association, up to 40% of all
homes purchased in the existing home sales report fall under that category.
This number will probably have to increase given the quantity of Alt-A and
prime borrowers that are expected to see their homes enter into foreclosure
over the coming months. Some cash buyers and other well positioned consumers
may find good opportunities to re-enter the housing sector over the next
several months, but we do not think in the short-term that this will be sufficient
to clear the outsized level of inventories currently on the market.
Trade Balance (July) Thursday 08:30 AM
The price of West Texas intermediate crude oil hit its recent peak on July
14 at $146.13 per barrel. This should provide a bit of a drag on the recent
improvement in the trade deficit. We expect that deficit should increase
modestly to -$58.5bln for the month. However, the real dollar goods balance
should continue to see modest declines and the external sector should continue
to provide support for overall economic activity during the third quarter
of 2008.
Import Prices (August) Thursday 08:30 AM
US inflation indicators should see their first sign of relief reflecting the
decline in headline costs. We expect that import prices will fall -0.7% the
month vs. the previous 1.7% increase in July. On an annual basis, import
prices should show a 19.8% increase. The primary catalyst behind the August
headline decline should be the fall in petroleum costs.
Initial Jobless Claims (Week ending Sep 7) Thursday 08:30 AM
Initial claims should fall back slightly to 440K during the upcoming week.
Over the next several weeks look for the weekly claims series to be quite
volatile on the back of dislocation in the labor sector due to the series
of hurricanes that look to hit the Southeast portion of the United States.
US Budget Statement (August) Thursday 2:00 PM
The US budget statement should continue to spill red ink again in August, when
our forecast suggests that the deficit should grow to -$107.1bln for the
month. The combination of increased outlays, falling tax revenues that final
rebate checks being cashed should push the deficit higher for the second
straight month.
Producer Price Index (August) Friday 08:30 AM
The market will focus on what we expect to be a decline of -0.4% m/m in headline
costs for producers. This improvement, which should be driven by the fall
in oil costs, has been widely priced in to expectations. However, we note
that core prices can be expected to rise 0.3% m/m and 3.8% y/y in additional
the 10.2% annual increase in headline prices. For the past several months
we have pointed out the risk due to rising total intermediate costs, which
are up 16.6% annually on a headline basis and 10.2% in the core. Fueling
this rise has been the 23.9% increase in the cost of material for non-durable
manufacturing, 36.4% cost of processed fuels and lubricants and 12.5% advance
in the cost of materials for durable manufacturing. We do not think that
these costs will be receding anytime soon and the risk of inflation into
the core will continue for some time even as headline costs continue to abate.
Most importantly, this is what led the Kansas City, Chicago and Dallas Fed
regional banks to ask for a 25 basis point hike in the discount rate to 2.5%.
According to the three Fed regional banks "higher input costs were being
passed through to product prices and that inflation expectations had risen
and judged that the upside risks to inflation were of greater concern than
the downside risks to growth."
Advance Retail Sales (August) Friday 08:30 AM
The retail sales environment during the month of August should reflect the
increasing strains that have become quite visible on the consumer. With the
impact of the stimulus fading and a lackluster late summer sales season in
the auto and back to school sales, we think that overall sales should see
a tepid increase of 0.1% in the headline and a -0.2% in the core, with risk
to the downside in both. Anecdotal reports from retailers do not bode well
for the series and the typical later summer surge associated with the fall
school season looks to have failed to materialize. Should the Redbook and
retail chain reports come in below our modest expectations, we will revise
down our forecast accordingly.
University of Michigan Consumer Confidence (September) Friday 08:30 AM
The recent decline in the price of gasoline should continue to provide support
to consumer confidence, which seems to have reached cyclical lows during
June. The preliminary September estimate of consumer sentiment should rise
to 63.9 as the recent fall in headline prices is passed through to consumers
in the guise of cheaper prices for energy. We think that the modest outbreak
in optimism is likely to be transitory once consumers, especially those in
the Northeast and upper Midwest, turn their attention to the cost of heating
oil and electricity costs during the upcoming winter months ahead.
Tweet
Author: Joseph Brusuelas
Joseph Brusuelas
Chief Economist
VP Global Strategy
Merk Investments LLC
Bridging academic rigor and communications, Joe Brusuelas provides the Merk team with significant experience in advanced research and analysis of macro-economic factors, as well as in identifying how economic trends impact investors. As Chief Economist and Global Strategist, he is responsible for heading Merk research and analysis and communicating the Merk Perspective to the markets.
Mr. Brusuelas holds an M.A and a B.A. in Political Science from San Diego State and is a PhD candidate at the University of Southern California, Los Angeles.
Before joining Merk, Mr. Brusuelas was the chief US Economist at IDEAglobal in New York. Before that he spent 8 years in academia as a researcher and lecturer covering themes spanning macro- and microeconomics, money, banking and financial markets. In addition, he has worked at Citibank/Salomon Smith Barney, First Fidelity Bank and Great Western Investment Management.
Mr. Brusuelas lives in Connecticut with his wife and St. Bernard.
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