Key U.S. Data Releases and Events

Next week, the reports on core producer and consumer prices during August will reinforce the view that underlying inflation remains dormant—core prices are expected to decline in both cases. While the "cash-for-clunkers" auto discount program is now over, retailers and manufacturers will have to continue to offer generous discounts to keep consumers engaged in the buying process, in view of shrinking wages and salaries. This gives the Federal Reserve plenty of room to keep interest rates low for an extended period, and term rates recently have cycled back down to reflect this reality.

Activity reports next week are expected to be generally positive. August retail sales should likely get a major lift from a surge in auto sales, industrial production is expected to move up for the second month in a row, and housing starts and permits are projected to continue climbing.

KEY U.S. DATA RELEASES THIS WEEK

Tuesday, September 15 – Producer Price Index (Aug.)

Total

• IHS Global Insight: +1.6%
• Consensus: +0.8%
• Last Actual: -0.9% (Jul.)

Core

• IHS Global Insight: -0.1%
• Consensus: +0.1%
• Last Actual: -0.1% (Jul.)

What to Look For

• The headline index is expected to surge 1.6% in August.
• Excluding food and energy, the core index is likely to shrink 0.1%.

Implications

Seasonally adjusted gasoline prices likely soared 29% last month, fueling the expected strong headline PPI gain. Food prices will probably reverse some of July's 1.5% contraction, lifting the headline index still higher. Excluding food and energy, the core index is likely to be down 0.1%. The government rebates offered as part of the "cash-for-clunkers" program will not affect the producer price index, but extra incentives from some manufacturers should drag the durables category, and consequently the core rate, lower.

Tuesday, September 15 – Retail Sales (Aug.)

Total

• IHS Global Insight: +2.3%
• Consensus: +1.8%
• Last Actual: -0.1% (Jul.)

Less Autos

• IHS Global Insight: +0.7%
• Consensus: +0.4%
• Last Actual: -0.6% (Jul.)

What to Look For

• Top-level retail sales likely jumped 2.3%.
• Excluding autos, sales are expected to be up 0.7%.

Implications

Retail sales jumped an estimated 2.3% in August, boosted by the "cash-for-clunkers" program, higher gasoline prices, and sales tax holidays in California, Texas, Florida, and other states. Light-vehicle sales have climbed sharply for two months in a row—from an annual rate of 9.7-million units in June to 11.2 million in July and 14.1 million in August—but are expected to fall back sharply in September. Excluding autos, sales are projected to rise 0.7%, but gasoline stations account for over half of that increase. With employment still falling and wages/salaries under downward pressure, consumers remain cautious, limiting their discretionary spending and reducing debt.

Wednesday, September 16 – Consumer Price Index (Aug.)

Total

• IHS Global Insight: +0.1%
• Consensus: +0.3%
• Last Actual: 0.0% (Jul.)

Core

• IHS Global Insight: -0.3%
• Consensus: +0.1%
• Last Actual: +0.1% (Jul.)

What to Look For

• The headline consumer price index should inch 0.1% higher.
• Core consumer prices are expected to drop by 0.3%.

Implications

Seasonally adjusted, the surge in energy prices was less steep than in the producer price survey, with gasoline expected to rise 8.7%. Typically, such a gain would have fueled a larger increase in the headline CPI, but the government's "cash-for-clunkers" program should drag the vehicles category sharply lower. The consumer survey will incorporate both the government and manufacturer incentives. Consequently, excluding food and energy, core consumer prices are expected to fall 0.3%.

Wednesday, September 16 – Industrial Production (Aug.)

• IHS Global Insight: +0.7%
• Consensus: +0.7%
• Last Actual: +0.5% (Jul.)

What to Look For

• Overall industrial production to be up 0.7%.

Implications

Manufacturing—paced by vehicle production rising at a double-digit percentage rate—is expected to lead the way, building on gains in July. With August temperatures close to normal, electricity output will not be the drag that it was in July, when the weather was hyper-mild. Core manufacturing excluding autos did not have a fantastic month, if worker hours are any indication, but most surveys indicate that manufacturing production activity is recovering, so we could be in for another very respectable gain in productivity during the third quarter.

Thursday, September 17 – Housing Starts and Building Permits (Aug.)

Starts

• IHS Global Insight: 0.613 Mil.
• Consensus: 0.595 Mil.
• Last Actual: 0.581 Mil. (Jul.)

Permits

• IHS Global Insight: 0.599 Mil.
• Consensus: 0.580 Mil.
• Last Actual: 0.564 Mil. (Jul.)

What to Look For

• Housing starts will likely be up 5.5% in August.
• Building permits should climb an even greater 6.2%.

Implications

Based on recent gains in single-family permits, single-family starts should post another strong increase. We are expecting a gain in multi-unit starts only because July's number, which equaled an all-time low, cannot fall much further. Single-family permits have risen 5% or more for four straight months. For August, we expect a similar gain. Multi-family permits fell to an all-time low in July (data start in 1959). Mathematically, they cannot fall much further, and for August we project a small gain.