By James Mehring
While other economies across the globe stumbled during the fourth quarter -- such as Germany and Japan -- the U.S. did quite well. Indeed, this week's revisions to fourth-quarter data are likely to show growth was stronger than first thought.
For starters, international trade will be less of a drag. The December trade gap was less than expected by economists. Plus, the November trade gap was trimmed due to a $1.4 billion understatement of exports to Canada.
SHIFTED FACTORY ORDERS?
Housing could also push growth higher. December housing starts were revised up, while actual December construction outlays were slightly above the Commerce Dept.'s estimates, and November outlays were upwardly revised. The advanced GDP report is released before all the December data is gathered, requiring the government to make assumptions about December results.
There appears to be little letup in the first quarter. The latest industrial production report was better than the headline numbers suggested. The flat production level was due to a 3% drop in output among utilities. Above-average temperatures during the month meant less demand for electricity and natural gas. Among manufacturers, output rose a respectable 0.4%.
The upcoming durable goods report will provide some insight into how well demand will hold up over the coming months. Economists will be attempting to asses the effect on the factory sector of the expiration of a special depreciation allowance at yearend. The sunsetting rule may have pulled forward orders originally planned for the early part of 2005. Right now, it appears economists see a minimal hangover, with a 0.1% gain forecasted for January.
Besides the new orders, the unfilled orders numbers also included in the report will show whether work is piling up. The larger the backlog the busier factories will be in the coming months.
NO SURPRISES IN TESTIMONY.
More good news for the economy is expected in the January consumer price index report. Inflation on the consumer level is expected to still be fairly benign, with a monthly gain of 0.2% for January. Producer prices less food and energy posted a surprising increase, but the rise was focused among autos, heating oil, alcohol, and tobacco. Given the fierce competition in autos, a reversal in the January price increases would not be surprising.
As long as inflation does not flare up and growth remains healthy, the Federal Reserve is expected to raise rates in quarter point increments through at least the first half of the year. Fed Chairman Alan Greenspan's testimony before Congress on Feb. 16 and 17 did little to change the consensus view. However, Fed watchers will look for further verification within the minutes of the February Federal Open Market Committee meeting due out on Wednesday.
Note: The financial markets will be closed on Monday, Feb. 21 in observance of the Presidents Day holiday.
MEETING OF NOTE
Monday, Feb. 21
U.S. President George W. Bush meets with France's President Jacques Chirac in Brussels.
Monday, Feb. 21, 4 p.m. EST
Federal Reserve Bank of Cleveland President Sandra Pianalto gives a speech on price stability entitled "Central Banks: Different Paths, Same Goal" at the Global Interdependence Center's International Economics Conference in Milan.
Tuesday, Feb. 22
Autodesk, Federated Department Stores, Home Depot, Novell, and more
ICSC-UBS STORE SALES
Tuesday, Feb. 22, 7:45 a.m. EST
This weekly tracking of retail sales, assembled by the International Council of Shopping Centers and UBS bank, will update buying activity for the week ending Feb. 19. In the week ended Feb. 12, sales nudged up by 0.1%, following a 2.2% surge in the prior week and a 1.9% drop in the week ended Jan. 29.
INSTINET REDBOOK RESEARCH STORE SALES
Tuesday, Feb. 22, 8:55 a.m. EST
This weekly measure of retail activity will report on sales for the third fiscal week of February, ending Feb. 19. Over the first two weeks, ended Feb. 12, sales were up 0.5% compared to the same period in January. During the full month of January, sales finished 0.9% above December.
CONSUMER CONFIDENCE INDEX
Tuesday, Feb. 22, 10 a.m. EST
The Conference Board's February index of consumer confidence is expected to decline to hold virtually unchanged at 103, based on a survey of economic forecasts taken by Action Economics. The January index moved up to 103.4, after a big bounce in December to 102.7.
Respondents were a little more optimistic about current business and job prospects in January. The outlook for business conditions for the coming six months was slightly lower and nearly unchanged when it came to the labor market. There has been a small divergence in the assessment of current and future prospects for business conditions and jobs over the past few months. The trend could be a sign of increased uncertainty about how the economy will perform this year.
RICHMOND FED SURVEY
Tuesday, Feb. 22, 10 a.m. EST
The Richmond Federal Reserve Bank will release its February survey of business conditions in the Richmond Fed district. The January survey showed that manufacturers were doing a little better. They also remained fairly optimistic about the first half of the year.
The headline index edged up to 2, from a reading of 1 in December, and -4 in November. The new orders, capacity utilization, and employment-related indexes improved in the January survey.
With regards to the next six months, the main index stood at 31, from 34 in December, and 32 in November. The new orders index ticked up to 31, from 30 in December. Respondents showed an increased desire to expand payrolls and are still looking to increase capital spending.
MEETING OF NOTE
Wednesday, Feb. 23
U.S. President George W. Bush meets with European Union and NATO leaders in Brussels.
U.S. President George W. Bush meets with German Chancellor Gerhard Schroeder in Germany.
12:40 p.m. EST
Federal Reserve Bank of Atlanta President Jack Guynn discusses the outlook for the U.S. economy at the Rotary Club of Birmingham in Birmingham, Alabama.
6:30 p.m. EST
Federal Reserve Bank of New York Vice President Richard Peach speaks about the housing market and the possibility of a housing bubble at the Money Marketeers of New York University in New York City.
Dana, Kerr-McGee, Lowe's Companies, Masco, TJX Companies, Williams Companies, and more.
Wednesday, Feb. 23, 7 a.m. EST
The Mortgage Bankers Assn. releases its tally of mortgage applications for both home buying and refinancing for the week ending Feb. 18. In the week ended Feb. 11 the purchase index retreated to 423.3, from 444.6 in the previous week, and 440.3 over the period of Jan. 28. The latest reading of the four-week moving average moved up to 436.8, from 443 for the week ended Feb. 4.
The average rate on a conventional 30-year mortgage, according to HSH Associates, declined to 5.66% in the week ended Feb. 11, from 5.73%.
The MBA's refi index moved up to 2530.1, from 2430.7 over the week of Feb. 4, and 2253.9 for the week ended Jan. 28. The four-week moving average climbed to 2286.9, from 2166.5 in the week ended Feb. 4.
CONSUMER PRICE INDEX
Wednesday, Feb. 23, 8:30 a.m. EST
Consumer prices for all goods and services probably grew by 0.2% in January according to Action Economics. The January tally will likely show some upward effect from gasoline prices. The national average price of gasoline closed December at $1.79 per gallon but reached $1.91 by the end of January.
In December, consumer prices slipped 0.1% on easing energy prices, after a 0.2% gain in November, and a 0.6% jump in October. The expected January increase would leave the yearly rate of inflation at 3.1%, down from 3.3% in December and 3.6% in November.
Excluding the volatile energy and food categories, consumer prices most likely grew by 0.2%. In each of the previous three months, core inflation ticked up by 0.2% as well. The yearly rate of core inflation for January would hold at 2.3%, after ticking up to 2.3% in December, from 2.2% in November, and 2% in both October and September.
Wednesday, Feb. 23, 2 p.m. EST
The Federal Reserve will release the minutes of the two day Open Market Committee meeting of Feb. 1 and 2. As of this year the Fed is now releasing the minutes three weeks after its monetary policy meeting. Prior to the change, minutes were released with a six to eight week lag. Among the key points economists and investors will be looking for is any mention of inflation targeting.
MEETING OF NOTE
Thursday, Feb. 24
U.S. President George W. Bush meets with Russian President Vladimir Putin in Bratislava, Slovakia.
12 p.m. EST
Federal Reserve Bank of St. Louis President William Poole speaks at Culver-Stockton College in Canton, Missouri.
5:30 p.m. EST
Federal Reserve Board Governor Ben S. Bernanke speaks about U.S. and global savings at the University of Arkansas at Little Rock.
Dynegy, Gap, H&R Block, JCPenney, Kohl's, Limited Brands, Newmont Mining, Safeway, Staples, Viacom, and more.
Thursday, Feb. 24, 8:30 a.m. EST
First-time claims for jobless benefits for the week ended Feb. 19 probably ticked up to 311,000. Jobless claims dipped to 302,000 for the week ended Feb. 12. The latest reading was the lowest since October of 2000. In the prior week, claims dropped to 304,000, from 316,000 in the week ended Jan. 29.
The four-week moving average fell to 311,800, from 315,800 over the week ended Feb. 5. During the week of Feb. 5, continuing jobless claims eased back to 2.72 million, from to 2.73 million in the prior period.
DURABLE GOODS ORDERS
Thursday, Feb. 24, 8:30 a.m. EST
Orders coming into factories for durable goods probably edged up by 0.1% in January. That's based on the Action Economics survey of economist forecasts. December orders grew by 1.1%, after an upwardly revised gain of 2% in November, and a 1% drop in October. Once again, economy watchers will be focused on the performance of core nondefense capital goods orders, which exclude the large ups and downs in aircraft bookings. In December, such orders rose by 2.1%, following a 1.2% gain in November, and a 4% drop in October.
Friday, Feb. 25
Clear Channel Communications, and more.
GROSS DOMESTIC PRODUCT
Friday, Feb. 25, 8:30 a.m. EST
The preliminary report on economic growth for the fourth quarter of 2004, measured by real gross domestic product, is expected to show the economy expanded by a seasonally adjusted annual rate of 3.6%. That is the consensus among economists queried by Action Economics. The first look at growth for the final quarter of last year stood at 3.1%. In the third quarter, the economy expanded at a seasonally adjusted annual rate of 4%, after a 3.3% increase in the second quarter, and a 4.5% surge in the first period of 2004. Overall, growth for all of last year stands at 4.4%, making it the best year since 1999.
EXISTING HOME SALES
Friday, Feb. 25, 10 a.m. EST
January sales of existing homes are expected to edge up to an annual rate of 6.75 million, according to Action Economics' survey of economists. In December, sales slowed by 3.3% to a rate of 6.69 million, after climbing 2.4% to a rate of 6.92 million in November.
Mehring is an economics editor for BusinessWeek in New York