Vital Signs for the Week of Oct. 17

On tap: The Federal Reserve's Beige Book, September producer prices, factory activity reports from the New York and Philadelphia Fed banks, and more

The lag in official economic data can be frustrating, especially when economy-altering events occur. What's more, in the case of natural disasters, such as the hurricanes, it can be difficult to capture the true impact in the most immediate data. That's proving to be the case right now.

For the time being, anecdotal reports on the economy will be relied upon more to shed light on how the economy is coping. Such reports also come with the advantage of being timelier than most government data.

This week, there are plenty of reports to provide an on-the-ground view of how the economy is faring. The most important of these will be the Federal Reserve's Beige Book. The Fed has been more vocal about inflation, leading analysts to expect rate hikes through at least the next three monetary policy meetings. Economists will pour over the report to see if businesses are passing along the costs of higher energy prices. The Fed's concern is that higher energy prices will get pushed into other products and services, and eventually effect wages. So far, there remains little evidence of this occurring.

The October regional reports on manufacturing activity from the Philadelphia and New York Federal Reserve Banks will compliment the Beige Book. All three will provide a measure of business sentiment. The September industrial production report showed a large 1.3% drop for the month, but the hurricanes, as well as the Boeing strike, had a serious impact on overall output. The regional factory activity reports will also offer information on prices paid and prices received, key indexes that will provide some feel for how much higher prices are squeezing goods producers.

The Housing Market Index is showing a drop in home builder enthusiasm. The September index stood at 65, the lowest level since July of 2003. While HMI readings are still indicative of a good market, the direction of the index certainly points to some cooling. The October index could prove just as useful as the September housing starts report, which also comes out this week.

Here's the weekly economic calendar.


Monday, Oct. 17, 4:30 p.m. EDT

Federal Reserve Bank of Philadelphia President Anthony Santomero speaks on monetary policy at North Carolina State University in Raleigh, N.C.

9:30 p.m. EDT

Federal Reserve Board Chairman Alan Greenspan speaks on energy at a meeting hosted by the Japan Business Federation, the Japan Chamber of Commerce and Industry, and the Japan Association of Corporate Executives in Tokyo.


Monday, Oct. 17

American Electric Power, Eaton, First Horizon National, General Motors, Hasbro, Mattel, Novellus Systems, Supervalu, W.W. Grainger, Wachovia, and more.


Monday, Oct. 17, 8:30 a.m. EDT

The New York Federal Reserve Bank releases the October survey of business conditions for manufacturers in the New York Fed district. The median forecast from economists polled by Action Economics is a reading of 17. The September index fell to 17, from 23 in August, and 23.9 in July.

While shipments increased in September, the new orders index showed a big slowdown, falling to 13.1. from 33.8 in August. The unfilled orders index was at -8.8 in September, implying a decline in backlogged orders. The biggest move was in the prices paid index, which shot up to 53.4, from 29 in August, and 21.6 in July.

Respondents' expectations for the coming six months were not as rosy. The September index of general business conditions for the next six months fell to 39.3, from 53.3 in August. The index stood at 47 in July, and 34 in June. The new order and shipments indexes were also softer.

However, respondents believe higher prices are here to stay for a while, with the price paid index shooting up to 75, from 47 in August. The prices received index, which measures whether respondents are receiving higher prices for their goods, also rose.


Tuesday, Oct. 18, 4:30 p.m. EDT

Federal Reserve Bank of San Francisco President Janet Yellen speaks on the U.S. economy in Salt Lake City, Utah.


Tuesday, Oct. 18

3M Company, American Standard, AmSouth Bancorp, C.R. Bard, Compass Bancshares, Fifth Third Bancorp, Forest Laboratories, Freeport-McMoRan Copper & Gold, Genuine Parts, Genzyme, Gilead Sciences, Intel, Johnson & Johnson, KeyCorp, Linear Technology, Mellon Financial, Merrill Lynch, Motorola, National City, Parker Hannifin, Safeco, Safeway, Sovereign Bancorp, State Street, Stryker, SunTrust, Teradyne, U.S. Bancorp, Unisys, United Technologies, Wells Fargo, Yahoo, and more.


Tuesday, Oct. 18, 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. 15. During the week ended Oct. 8, retail sales rose 0.2%, after a 0.6% jump during the week of Oct. 1, and a 0.1% nudge higher in the previous period.


Tuesday, Oct. 18, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales through the first two fiscal weeks of October, ended Oct. 15. Through the first fiscal week of October, sales were up 0.7% compared with the same period in September. For the entire month of September, sales rose 0.4%.


Tuesday, Oct. 18, 8:30 a.m. EDT

Producer prices for finished goods sold by U.S. businesses in September were pushed higher by energy. Economists queried by Action Economics forecast a 1% surge. August producer prices were up 0.6%, after a 1% gain in July. Energy prices shot up 3.7% in August, after a 4.4% increase in July. Producer prices were up 5.1% from a year ago in August, after picking up to a pace of 4.6% in July, from 3.6% in June.

Excluding food and energy costs, the September core producer price index probably increased by 0.2%. In August, core producer prices rose were unchanged, after a 0.4% gain in July, and a 0.1% easing in June. Compared with the same month a year ago, the August core price index cooled down to 2.5%, after registering a 2.8% jump in July.


Tuesday, Oct. 18, 1 p.m. EDT

The National Association of Home Builders and Wells Fargo bank issue the monthly survey results for October. The report updates housing market conditions by measuring builders' assessments of current sales, buyer traffic through model homes, and expected demand. In September, the activity index edged down a little further, to 65. In August, the index fell to 67, from 70 for July, and 72 in June.

The index tracking single-family home sales edged down to 72, from an upwardly revised level of 73 for August, and 76 in July. Expectations for sales in the coming six months suffered the steepest fall, to 69, from 77 in August and July.

The September index for prospective buyer traffic slowed to 47, from 50 in August, and 55 in both July and June. The index has started to show an inflection in the housing market. According to the NAHB, home builders believe the housing market is beginning to cool.


Wednesday, Oct. 19, 12:20 p.m. EDT

Federal Reserve Bank of Cleveland President Sandra Pianalto speaks at the Columbus Metropolitan Club's Weekly Forum in Columbus, Ohio.

12:30 p.m. EDT

Federal Reserve Bank of New York President Timothy Geithner speaks to the Asia Society in New York City.


Wednesday, Oct. 19

Abbott Laboratories, Altria Group, Ambac Financial Group, Amgen, Bank of America, CIT Group, Comerica, Cooper Industries, E*TRADE Financial, Eastman Kodak Company, eBay, EMC, General Dynamics, Honeywell, Huntington Bancshares, Illinois Tool Works, IMS Health, J.P. Morgan Chase & Co, Leggett & Platt, MBNA, Northern Trust, Office Depot, PMC-Sierra, QLogic, SBC Communications, St. Jude Medical, Synovus Financial, The New York Times, Torchmark, Washington Mutual, and more.


Wednesday, Oct. 19, 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. 14. The purchase index slowed to 469.5, from 473.8 in the week ended Sept. 30, from 483.1 in the week ended Sept. 23. The four-week moving average also retreated to 481.7, from 492.7 for the week ended Sept. 30 and 499 in the previous week. The average rate on a conventional 30-year fixed mortgage, according to HSH Associates, climbed to 6.13% in the week ended Oct. 7 after rising to 6.05% during the week ended Sept. 30.

The MBA's refi index dropped to 2004.9 in the week ended Oct. 6, after holding at 2107.4 in the prior week, from 2106.6 during the week of Sept. 23. The four-week moving average dropped to 2143.2, from 2191.6 in the week ended Sept. 30.


Wednesday, Oct. 19, 8:30 a.m. EDT

The pace of housing starts is expected to show a small slowdown. The consensus estimate from Action Economics is an annual pace of 1.98 million. August housing starts came in at an annual rate of 2.01 million, down slightly from 2.03 million in July, and 2.07 million in June. While the pace of housing starts have edged a little lower, the rate of houses under construction have risen for five straight months.


Wednesday, Oct. 19, 2 p.m. EDT

The Federal Reserve will release its compilation of regional economic activity, based on survey responses from each of its 12 districts. The Beige Book comes ahead of the Nov. 1 monetary policy meeting. Analysts will be looking for further insights into how much of an effect Hurricanes Rita and Katrina, as well as higher energy, have had on the rest of the economy.

Economists queried by Action Economics expect another 25 basis point rate hike, to 4%. Now, economists believe the Fed will keep raising rates in the following two meetings. Federal Reserve officials have sounded more hawkish in recent appearances.

In addition, the minutes for the Sept. 20 monetary policy meeting expressed little reason to expect a pause by the Fed anytime soon. In the minutes, the Fed stated that even at 3.75%, "the federal funds rate would likely be below the level that would be necessary to contain inflationary pressures, and further rate increases probably would be required."


Thursday, Oct. 20, 9:45 a.m. EDT

Federal Reserve Bank of St. Louis President William Poole gives the welcoming remarks at an economic policy conference hosted by the St. Louis Fed in St. Louis.

1:10 p.m. EDT

Federal Reserve Bank of Atlanta President Jack Guynn discusses the U.S. economic outlook before the Entrepreneurship Institute's President Forum in Atlanta.

7 p.m. EDT

Federal Reserve Bank of Richmond President Jeffrey Lacker gives a speech entitled "Interest Rate Policy After Greenspan" at Winthrop University in Rock Hill, S.C.


Thursday, Oct. 20

Affiliated Computer Services, Bank of New York, Baxter International, Broadcom, Capital One Financial, Coca-Cola, Consolidated Edison, Convergys, Danaher, Dover Corp., Dow Jones & Company, Eli Lilly, Equifax, Fiserv, Ford Motor, Freescale Semiconductor, Golden West Financial, Hershey, Ingersoll-Rand, Laboratory Corp. of America, McDonald's, McGraw-Hill Cos., MedImmune, Molex, Noble, Nucor, Pfizer, PNC Financial Services Group, Quest Diagnostics, Robert Half International, Rohm and Haas, SLM, Southwest Airlines, Textron, United Parcel Service, Whirlpool, Xilinx, XTO Energy, Zions Bancorp, and more.


Thursday, Oct. 20, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended Oct. 15 is forecast to be 370,000. Jobless claims stood at 389,000, after an upwardly revised 391,000 level for the week ended Oct. 8, after slowing to 368,000 for the week ended Sept. 24, from 435,000 in the previous period.

The four-week moving average eased back to 395,800 after surging to 404,500 in the previous period, from 388,800 for the week of Sept. 24. Continuing jobless claims for the week ended Oct. 1 eased to 2.87 million, from 2.88 million in the week ended Sept. 24.


Thursday, Oct. 20, 10 a.m. EDT

The Conference Board's September composite index of leading economic indicators is expected to have dropped 0.5%. That's the consensus forecast from Action Economics. The August leading index fell 0.2%, after a 0.1% decline for July, and a 1.1% jump in June. The August leading index was up 1.9% from a year ago. In July, the index rose 2.1% from a year ago.

The June index contained some changes to the leading index, as well as revisions to historical data which made recent data more positive. A major change is how the spread between the 10-year Treasury bond and the Fed funds rate effects the leading indicators index. The yield curve will have a negative impact on the index only if it inverts. In other words, if the Fed funds rate is higher than the 10-year Treasury rate. A smaller positive gap between the long-term and short-term rate just means a smaller positive contribution.


Thursday, Oct. 20, 12 p.m. EDT

The Philadelphia Federal Reserve Bank releases its Oct. manufacturing activity index for the mid-Atlantic region. The consensus among economists queried by Action Economics is for an index reading of 10. The September Philly Fed index tumbled to 2.2, from 17.5 in August and 9.6 in July. The June index was -2.2.

The new orders index fell to -0.5, from 19.8 in August, and 5 in July. Unfilled orders also slipped with the index plunging to -10.9, from 7.2 in August. However, the unfilled orders index has been below 0 -- indicating more respondents than not are reporting a fall in backlogged orders -- in every month but August this year.

Expectations over the coming six months also deteriorated. The future expectations index for general activity was 7, after climbing to 33.4 in August, from 15.3 in July. Fewer manufacturers expect new orders and shipments to increase in the coming months.

In the September survey, the Philly Fed asked respondents about the impact of higher energy prices on new orders and production. Currently, 6.2% of respondents said energy is having a significant effect on new orders and 11.3% of manufacturers said production is being significantly affected. For the coming six months, 17.5% of the regions manufacturers believe energy prices will have a significant effect on production.


Friday, Oct. 21, 11:45 a.m. EDT

Federal Reserve Bank of St. Louis President William Poole moderates a panel discussion on the role of the government in private markets for credit insurance at a St. Louis Fed conference on economic policy.


Friday, Oct. 21

Alltel, AT&T, Caterpillar, Ecolab, Manor Care, Maytag, RadioShack, Reebok¸ Schlumberger¸ VF, Weyerhaeuser, Wyeth, Xerox, and more.

By James Mehring

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