Vital Signs for the Week of Oct. 10

On tap: September consumer price index, industrial production, and retail sales figures, August foreign trade data, October consumer sentiment, and more

Energy prices are still high. Despite an 11% drop in crude oil since the start of September, the spot price of crude remains above $60 per barrel. Now that the winter heating season is around the corner, analysts are worried that demand for heating oil and natural gas will keep the pressure on energy prices.

Consumers have shown great resiliency. September chain store sales rose 4% from a year ago. Nonetheless, investors remain on the lookout for signs of households compensating for higher transportation and utility costs by reining in their spendthrift ways.

Retail sales figures will shed more light on how consumers handled September energy-price surges. Total sales probably improved a little even as September vehicle sales slipped. But the key component to watch is gasoline station sales. The higher price of gas will push gas station sales higher. Analysts will take out gas station and vehicle sales in order to get a better handle on consumer spending.

Economists expect a small rebound in consumer sentiment. The September employment data were not as downbeat as expected and Hurricane Rita, which struck ahead of the final September sentiment report, did not cause as much damage as anticipated. Consumer confidence numbers have not tracked particularly well with actual spending data in recent history. However, this report will hold added significance for Wall Street since the 19.6 point plunge in the past two months was the biggest on record.

Economists and investors are focusing on the possibility that energy costs may get passed through to the rest of the economy. As a result, the September consumer price index report will attract a lot of attention. The consensus calls for a 0.9% rise, with a more subdued 0.2% gain with food and energy removed. The important exercise for this report is to see what is lifting core inflation.

Pre-hurricane data have painted the picture of a strong U.S. economy. The upshot, however, is a mixture of decent economic momentum, energy supply constraints, and a huge pile of fiscal stimulus will lead to additional inflationary pressures.

Here's the weekly economic calendar.

The bond market will be closed on Monday, Oct. 10 in observance of the Columbus Day holiday.


Monday, Oct. 10

ALCOA, and more.


Tuesday, Oct. 11

Apple Computer, Gannett, and more.


Tuesday, Oct. 11, 7:45 a.m. EDT

This weekly tracking of retail sales, compiled by the International Council of Shopping Centers and UBS bank, will update buying activity for the period ending Oct. 8. During the week ended Oct. 1, retail sales grew 0.6%, after a 0.1% gain during the week of Sept. 24, and a 2.1% plunge in the previous period.


Tuesday, Oct. 11, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales through the first fiscal week of Oct., ended Oct. 8. For the entire month of September, sales rose 0.4%, after falling 1% in August. September sales figures held up well despite the hurricanes.


Tuesday, Oct. 11, 2 p.m. EDT

The Federal Reserve will release the minutes of the Open Market Committee meeting held on Sept. 20. Starting this year the Fed has released the minutes three weeks after a monetary policy meeting.

The Fed's September post-meeting announcement appeared to be marginally sterner on inflation. The central bank did state that damage from Hurricane Katrina was not expected to pose a long-term threat to the economy's health. The release stated that higher energy prices could fuel additional inflationary pressures. In addition, long-term inflation expectations shifted from being "well contained" to "contained."

The latest minutes may shed some light on the Fed's view of energy prices and potential pass-through affects into the rest of the economy. In addition, the minutes could add some insight into Federal Reserve Governor Mark Olson's vote against raising the Fed funds rate.


Wednesday, Oct. 12, 10 a.m. EDT

The Energy Information Administration presents its winter fuels heating overview in Washington, D.C.

3:15 p.m. EDT

Federal Reserve Board Governor Mark Olson speaks about the U.S. economy at a Fraser Institute luncheon in Vancouver.


Wednesday, Oct. 12

Harley-Davidson, M&T Bank, MGIC Investment, Monsanto, and more.


Wednesday, Oct. 12, 7 a.m. EDT

The Mortgage Bankers Association releases its numbers on mortgage applications for both home buying and refinancing for the week ending Oct. 6. The purchase index slipped a little more, to 473.8, from 483.1 in the week ended Sept. 30. The four-week moving average also retreated to 492.7 for the week ended Sept. 30, from 499 in the previous week. The average rate on a conventional 30-year fixed mortgage, according to HSH Associates, climbed to 6.05% in the week ended Sept. 30 after rising to 5.97% during the week ended Sept. 23.

The MBA's refi index nudged up to 2107.4, from 2106.6 during the week of Sept. 23. The four-week moving average declined to 2191.6, from 2254.0 during the week ended Sept. 23.


Thursday, Oct. 13

Apollo Group, Tribune, and more.


Thursday, Oct. 13, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended Oct. 8 is forecast to have held at 390,000. Jobless claims ticked back up to 390,000 for the week ended Oct. 1, after slowing to 369,000 for the week ended Sept. 24, from 435,000 in the previous period. The number of jobless claims resulting from Hurricane Katrina have cooled off a little but there were likely some claims resulting from Hurricane Rita.

The four-week moving average climbed to 404,500, from 388,800 for the period ended Sept. 24. Continuing jobless claims for the week ended Sept. 24 moved up to 2.91 million, from 2.79 million in the week ended Sept. 17.


Thursday, Oct. 13, 8:30 a.m. EDT

The monthly U.S. trade deficit of goods and services probably widened in August. The median forecast of economists surveyed by Action Economics is a deficit of $59.5 billion. The July trade gap came in below expectations at $57.9 billion, and the June trade gap was $59.5 billion.

Higher energy prices during the course of August probably drove the monthly deficit higher. Oil prices started the month at just under $62 per barrel and ended the month at over $69 per barrel. Natural gas prices rose from $8 per BTU to $12.7 per BTU. The trade report tallies up imports by value and not volume.

The September trade deficit could be even larger. Oil prices have remained elevated above $60 per barrel and the damage to the U.S energy infrastructure has required increased importation of unleaded gasoline and oil.


Thursday, Oct. 13, 8:30 a.m. EDT

Import prices kept climbing in September. The median forecast for September is 0.9%, according to Action Economics. In August, the import price index shot up 1.3% on a 7.1% surge in prices of energy imports. July import prices rose 0.8% and June prices grew 1.2%, as energy import prices climbed 6.1% and 8.6%, respectively. Excluding petroleum, import prices held steady in August, after three straight monthly 0.2% declines.

Overall, import prices were up 7.6% from a year ago in August, from 7.8% in July. Strip out oil and the import prices were up 1.8% from a year ago in August, and 2.1% in July. Outside of energy, import prices remain calm in the other major categories.

September export prices most likely edged up 0.2%. In August, export prices eased 0.1% after a 0.1% gain in July. It appears the recent strengthening of the U.S. dollar may be having an effect on export prices. In January, exports prices were up 4% from a year ago but the yearly pace slowed to 3.1% in August. Capital goods exports prices were down 0.2% from a year ago, the first yearly dip since May of 2004.


Thursday, Oct. 13, 8:30 a.m. EDT

The federal government is forecast to have run a budget surplus of $37 billion in September. That's the median estimate among economists surveyed by Action Economics. The September figure should reflect the early emergency assistance spending for hurricane victims. Of the total $62 billion of federal funds earmarked to help rebuild the hard-hit Gulf region, the Congressional Budget Office estimates that $2 billion was used in September. However, there is probably some upside risk to that September spending figure.

In August, the government ran a $50 billion deficit, after a $52.8 billion deficit in July. Last year, the September surplus was $24.6 billion. If the forecast for a September surplus holds up, it would be the largest surplus for the final month of the fiscal year since 2002.

The fiscal year 2005 deficit through eleven months was $352.6 billion. Through the same period of fiscal year 2004, the deficit stood at $437.5 billion.


Friday, Oct. 14

U.S. Treasury Secretary John Snow attends the Group of 20 finance ministers meeting near Beijing.

12 p.m. EDT

Federal Reserve Bank of St. Louis President William Poole speaks about the Fed's monetary policy role in Washington, D.C.


Friday, Oct. 14

BB&T, First Data, General Electric, Knight Ridder, Marshall & Ilsley, UnitedHealth Group, and more.


Friday, Oct. 14, 8:30 a.m. EDT

Retail sales were resilient in September. The consensus among economists queried by Action Economics is for a 0.3% increase.

In August, sales slumped 2.1% while July sales rallied 1.8%. Auto sales played a big role in the overall August and July numbers. Vehicle sales revved to an annual pace of 20.9 million units in July and then cooled off to a pace of 16.8 million in August.

Excluding autos, September retail sales are expected to rise 0.6%. September Chain Store sales and weekly retail sales figures were positive all things considered, boding well for the Census Dept.'s ex-auto sales figures. August retail sales excluding autos rose 1% after a 0.5% gain in July.


Friday, Oct. 14, 8:30 a.m. EDT

Consumer prices for all goods and services most likely rose 0.9% thanks to surging energy prices during September. That's the median forecast of economists polled by Action Economics.

The August consumer price index zipped up 0.5% for a second straight month, after holding steady in June, and slipping 0.1% in May. In August, the index was up 3.6% from a year ago, the highest yearly rate since a 3.6% pace in May of 2001. The July index was up 3.2% from a year ago.

The average price for a gallon of gasoline was $2.90 in September, according to weekly Energy Dept. data. In August, the average weekly price was $2.49.

Excluding the volatile energy and food categories, consumer prices probably increased 0.2%. In each of the past four months, the core consumer price index rose 0.1%. The yearly rate of core inflation for August was 2.1%, unchanged from July, but up a tick from the 2% pace of June.

The keys to inflation will be how elevated energy prices remain over the coming months, especially entering the winter heating season, and whether businesses find more ability to push increased energy costs along to customers.


Friday, Oct. 14, 8:30 a.m. EDT

August inventories held by manufacturers, wholesalers, and retailers most likely bounced back 0.3%. That's the median forecast by economists surveyed by Action Economics. Durable goods inventories were already reported to have fallen 0.2% in August and wholesale inventories grew 0.5%. Total business inventories were down 0.5% in July, and were unchanged in June.


Friday, Oct. 14, 8:30 a.m. EDT

Inflation-adjusted weekly earnings of production workers probably fell 0.8% in September. The Labor Dept.'s employment report showed a 0.1% rise in weekly earnings, while economists expect a 0.9% increase in the September consumer price index. August real earnings fell 0.5%, after a 0.1% fall in July. Compared to the same period a year ago, inflation-adjusted earnings were down 1.1% in August. Real wages were off 0.4% from a year ago in July.


Friday, Oct. 14, 9:15 a.m. EDT

U.S. industrial production probably contracted 0.4% in September. That's the consensus estimate from economists polled by Action Economics. August industrial output edged up by 0.1% for a second straight month, following a 0.8% increase in June. Declines in mining and utilities fell while factory production rose 0.3%. In addition, production of machinery fell 2.6% and production of petroleum products slipped 0.9%.

The average September operating rate for all industries most likely retreated to 79.4%. The August rate held at 79.8% for a third straight month.

Business equipment production eased 0.2% in August, after a 1.6% spike in July. The August result was likely payback for the strong July. September output will likely reflect some interruptions from hurricanes. However, the Institute for Supply Management's September factory activity report was upbeat and manufacturing new orders were robust in August.


Friday, Oct. 14, 9:45 a.m. EDT

The University of Michigan's Survey Research Center will report its preliminary reading of consumer sentiment for October. The median forecast from Action Economics is for a reading of 80.

The final September index didn't budge from the initial reading of 76.9. In August, the final reading was 89.1, down from 96.5 in July. The plunge between July and September was the biggest two-month drop on record.

However, the consumer confidence indexes can bounce back quickly after a significant event. The University of Michigan's consumer sentiment index fell from 91.5 in August of 2001 to 81.8 in September. The drop was a reaction to terrorist attacks. By January, 2002, the sentiment index was back up to 93. The nagging issue with the most recent drop is that one underlying issue, high energy prices, has not gone away yet.

The final September report also showed that households have upped their estimates on inflation. The expectation that prices will rise 4.3% in the year ahead is the highest since 1990 and has also caused respondents to become less optimistic about their financial positions.

By James Mehring

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