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Key US data releases and events

Published: 10/4/2013
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Government shutdown continues as debt ceiling fight looms; economic reports likely to be delayed



The government shutdown could depress fourth-quarter GDP growth by 0.16 percentage point. Congress' failure to agree on a stopgap spending bill caused nonessential government activities to shut down this week for the first time since 1996. Some 770,000 federal workers were furloughed. We estimate that their missed hours will cut government output by about $1.6 billion per week and shave 0.16 percentage point from fourth-quarter GDP growth. A short-lived shutdown may not result in much of a multiplier effect so long as government workers expect back pay. Business with contractors might simply be delayed until later in the quarter. But businesses in the DC area that serve government employees will suffer. And if the shutdown drags on, the effects will start to add up and could collide with a debt ceiling crisis.

The debt ceiling looms. According to the Treasury, the debt ceiling must be raised by October 17. Otherwise, massive cutbacks in government spending are in store, which could drive the economy into recession. The other major concern is that the Treasury misses or delays a debt payment. This would be catastrophic for financial markets as investors add a default premium to US Treasury securities. Credit markets would freeze as the collateral value of Treasury securities dropped, interest rates would spike, and US debt would be downgraded. Our view is that cooler heads will prevail and that Democrats and Republicans will agree to raise the debt limit in time (perhaps with some concessions to Republicans that do not involve Obamacare).

The shutdown has disrupted the usual flow of public data. As a result, several of the reports due out this past week have been delayed, including August construction spending and the September employment report. We continue to anticipate that September employment growth, once the report is released, will come in at 150,000.

However, private organizations are still releasing data; the September ISM Manufacturing and Non-Manufacturing indices were published on schedule this week. The manufacturing report rose to 56.2, a reading we consider “too good to be true.” No other measure of manufacturing activity is reporting such a rapid expansion in orders and shipments. We believe that the outlook for manufacturing has improved over the summer, just not by this much. The nonmanufacturing report tells a more modest tale: these industries are still expanding, but at a slower pace. At 54.4, the index is now in line with its six-month average. The employment sub index shed 4.3 points, indicating a labor market still on shaky ground.

Consumer sentiment is on tap for next week. We expect that the government shutdown and debt ceiling fight will cut the Reuters/University of Michigan Consumer Sentiment Index by 3.9 points to 73.6 in October. Otherwise, three reports scheduled to be released next week are produced by agencies currently on furlough, including International Trade, Retail Sales, and the Producer Price Index. These figures will be delayed, even if the shutdown ends before the scheduled publication dates. Nevertheless, the trade gap likely narrowed in August thanks to a decline in imports. Producer prices likely rose 0.3% in September on rising fuel costs. And retail sales likely increased just 0.1% in September, held back by a drop in autos.

Tuesday, 8 October (tentative) –Trade Balance (Aug.)

  • IHS Global Insight: -$38.5 Billion
  • Consensus: -$39.4 Billion
  • Last Actual: -$39.1 Billion (Jul.)

What to look for

  • Narrower deficit

Implications

We expect that the trade balance narrowed by $0.6 billion in August thanks to fewer imports.

Friday,11 October (tentative) – Retail Sales (Sep.)

Total

  • IHS Global Insight: 0.1%
  • Consensus: 0.1%
  • Last Actual: 0.2% (Aug.)

Ex-auto

  • IHS Global Insight: 0.6%
  • Consensus: 0.4%
  • Last Actual: 0.1% (Aug.)

What to look for

  • Weakness due to autos

Implications

Retail sales likely grew only 0.1% in September, after a 0.2% gain in August. Auto sales were relatively weak in September compared with August's robust reading.

Friday, 11 October (tentative) – Producer Price Index (Sep.)

Total

  • IHS Global Insight: 0.3%
  • Consensus: 0.2%
  • Last Actual: 0.3% (Aug.)

Core

  • IHS Global Insight: 0.1%
  • Consensus: 0.1%
  • Last Actual: 0.0% (Aug.)

What to look for

  • Energy-fueled inflation

Implications

The Producer Price Index likely rose 0.3% in September, buoyed by rising prices for fuel oil, propane, and natural gas. Excluding food and energy, prices likely increased 0.1%.

Friday, 11 October – Reuters/University of Michigan Consumer Sentiment Index (Oct., prelim.)

  • IHS Global Insight: 73.6
  • Consensus: 76.0
  • Last Actual: 77.5 (Sep.)

What to look for

  • Pessimism over Washington

Implications

The preliminary October Reuters/University of Michigan Consumer Sentiment Index likely fell 3.9 points to 73.6, owing to political bickering and finger-pointing over the government shutdown and upcoming debt ceiling crisis.

by Paul Edelstein, Stephanie Karol, and Doug Handler

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