Key US Data Releases and Events

The economic recovery continues to pass crucial tests of its sustainability: job growth exceeded 200,000 in February; the ISM services index showed accelerated expansion; and credit markets are starting to thaw on both the supply and demand sides. With businesses leaning increasingly on labor hours instead of productivity gains to boost output, economic growth should be more balanced—if still subdued—this year, benefiting jobs and incomes. Meanwhile, the Greek debt swap is moving forward with sufficient participation from private creditors, while the Fed contemplates sterilized bond purchases to lift the housing market. But we are not out of the woods yet. Soon enough, we’ll learn how much of the recent improvements were weather-related as we move from a warm winter to a “par-for-the-course” spring. Consumers will have a chance to respond to higher gasoline prices and, in the background, the Eurozone debt crisis will continue. Nevertheless, double-dip recession odds are receding—to 20% in our latest US macroeconomic forecast. GDP growth will still be weak this year, but perhaps more assured.

This coming week (March 12–16), the focus pivots from Greece to the Federal Reserve. But the tea leaves indicate that the upcoming Federal Open Market Committee (FOMC) meeting on March 13 will be an uneventful one. That means no change to the forward rate guidance, no QE III, and no additional “duration twist” to the balance sheet. The Fed wants to give markets more time to absorb the big steps it took at the January meeting—the extension of the forward rate guidance through 2014 and the publication of Fed members’ interest-rate projections. Additionally, Chairman Bernanke wants more time to determine whether the pickup in jobs in recent months is a genuine signal that the economy has entered a new accelerated growth phase. Currently, the chairman remains unconvinced and the prevailing view at the Fed is that unemployment will stay above 8% this year, with inflation below 2%. Talk of sterilized bond purchases makes QE III more likely this year, but not at this meeting.

On the data front, strong auto sales and rising gasoline prices likely boosted retail sales in February, but even discretionary categories are expected to post healthy gains. Consumer and producer price inflation likely accelerated in February thanks to the spike in energy prices, but with little pass-through to core inflation. Consumer sentiment is expected to have improved in early March, with the rise in gasoline prices dwarfed by better consumer fundamentals. Industrial production likely increased in February, with a rebound at utilities offsetting a modest decline in vehicles production. Unemployment claims numbers may get extra scrutiny as the downward trend seems to have halted recently. This past week’s increase to 362,000 is probably just normal week-to-week volatility, but could be a first sign of trouble for the jobs market.

Tuesday, March 13 – Retail Sales (Feb.)

Total

• IHS Global Insight: 1.2%
• Consensus: 0.7%
• Last Actual: 0.4% (Jan.)

Less Autos

• IHS Global Insight: 0.9%
• Consensus: 0.5%
• Last Actual: 0.7% (Jan.)

What to Look For

• A rise in overall retail sales due to stronger auto sales and gasoline prices.

Implications

Retailers had a good month in February as consumers spent with renewed optimism. Monthly ICSC chain-store sales showed continued growth at a moderate pace. Unseasonably warm weather, improved consumer confidence, rising equity prices, and better job prospects are offsetting the impact of rising pump prices. Strong auto sales and higher gasoline prices should push overall retail sales up 1.2%. Excluding autos, sales likely gained a healthy 0.9%. Retail excluding autos and gasoline should increase 0.5% in February, after a 0.6% gain in January and an outright decline in December. 

Tuesday, March 13 – FOMC Press Release/ Press Conference

Effective Federal Funds Rate

• IHS Global Insight: 0.00–0.25%
• Consensus: 0.00–0.25%
• Last Actual: 0.00–0.25%

What to Look For

• No policy changes

Implications

The upcoming Federal Open Market Committee meeting on March 13 will be an uneventful one. That means no change to the forward rate guidance, no QE III, and no additional “duration twist” to the balance sheet.

Thursday, March 15 – Producer Price Index (Feb.)

Total

• IHS Global Insight: 0.5%
• Consensus: 0.5%
• Last Actual: 0.1% (Jan.)

Core

• IHS Global Insight: 0.2%
• Consensus: 0.2%
• Last Actual: 0.4% (Jan.)

What to Look For

• A sharp increase in producer prices due to the continued increase in oil prices

Implications

Producer prices likely climbed sharply, as energy (especially oil) came roaring back as the main villain in the inflation story. Energy prices are seen rising 1.9%, with a 5.5% increase in gasoline offsetting a decline in natural gas. Core inflation, meanwhile, is clocked at more subdued 0.2% pace because higher oil prices have not filtered into other prices yet.

Friday, March 16 – Consumer Price Index (Feb.)

Total

• IHS Global Insight: 0.5%
• Consensus: 0.4%
• Last Actual: 0.2% (Jan.)

Core

• IHS Global Insight: 0.2%
• Consensus: 0.2%
• Last Actual: 0.2% (Jan.)

What to Look For

• An increase in consumer price inflation thanks to gasoline

Implications

CPI inflation was likely the highest since March 2011 thanks to a 6.3% spike in gasoline. Food prices probably climbed about as fast as in December and January. Otherwise, core CPI inflation was likely a subdued 0.2%.

Friday, March 16 – Industrial Production (Feb.)

• IHS Global Insight: 0.6%
• Consensus: 0.4%
• Last Actual: 0.0% (Jan.)

What to Look For

• A modest rise in industrial production

Implications

Industrial production probably rose 0.6% in February, as a drag from a modest easing in vehicle production partly offset a rebound in utility output. Utilities are 10% of industrial production and have fallen for five of the past six months. Weather went from boosting utility demand to depressing demand, but January was more "unusual" than February, so demand will bounce back even though it remains well below the level for seasonable weather and almost 4% below a year ago. Vehicles will not be a major plus for production, and core manufacturing output will grow modestly, but utilities will be the wing factor.

Friday, March 16– Reuters/University of Michigan Consumer Sentiment Index (Preliminary March)

• IHS Global Insight: 76.3
• Consensus: 75.6
• Last Actual: 75.3 (Final Feb.)

What to Look For

• Improved consumer sentiment despite the drag from gasoline prices

Implications

Another uptick to consumer sentiment following an improved jobs market and rising equity prices. Gasoline prices are starting to be a drag, but not enough to make consumers more pessimistic.

by Nigel Gault and Paul Edelstein