Key Macro Events In The Coming Week

Not much in terms of economic data but lots of corporate news with the official Q2 earnings season kick off, as well as a plethora of Fed speakers which in a centrally-planned world, is all that matters.

Monday, July 8

  • 03:00PM Consumer credit, May (consensus +$12.5bn, last +$11.1bn)

According to the Fed's monthly report, consumer credit grew an average of $13.1bn per month over the past year. The consensus expects a similar rate of increase in May. Non-revolving credit outstanding (e.g., auto loans) has recovered much more strongly than revolving credit (e.g., credit cards) since the end of the recession.

Tuesday, July 9

  • 07:30AM NFIB small business optimism, June (consensus 94.7, last 94.4)

Small business optimism has improved substantially over the past two months, nearing a post-crisis high. The recent improvement was led by a sharp increase in the percent of respondents expecting the economy to improve in the future, which had been near all-time lows. Despite recent gains, the level of small business optimism remains depressed compared with levels seen during the last business cycle recovery. According to the NFIB survey, small business owners have generally listed taxes, government requirements, and poor sales as their biggest business problems in recent years.

  • 10:00AM JOLTS job openings, May (last 3.757m)

The JOLTS report contains information on job openings, as well as rates of hiring and job separation. Job openings remain relatively high compared with the level of the unemployment rate. Some have argued that this may reflect structural mismatch in the labor market; however, this is also a typical pattern seen early in recoveries. The hiring rate?one of the indicators noted by Fed officials as informing their broad view of whether a substantial improvement in the labor market has occurred?ticked up to 3.3% in the last report, but remained within the depressed range seen in recent years. In contrast, the layoff rate (at 1.2%) has returned to a normal level, after spiking sharply in 2008/2009.

Wednesday, July 10

  • 07:00AM MBA mortgage applications, week of July 5 (last -11.7%)

New mortgage applications dropped by 41% over the past two months, coincident with a substantial increase in mortgage rates. According to the latest weekly Freddie Mac survey, the national average 30-year FRM rate stood at 4.29%, versus 3.35% in early May. The drop in mortgage applications has been almost entirely due to refinancing applications, while new purchase applications have remained range-bound.

  • 10:00AM Wholesale inventories, May (consensus +0.3%, last +0.2%)

Although manufacturing inventories were roughly unchanged in May, the consensus expects a pickup in wholesale inventory growth. The ratio of wholesale inventories to sales stands at 1.21, at the higher end of the range seen in recent years. Consensus expects inventory investment to make a moderate positive contribution to Q2 GDP growth, following a more substantial positive contribution in Q1.

  • 02:00PM FOMC meeting minutes, June

In light of extensive commentary from Fed officials since the June FOMC meeting, this month's minutes may seem dated. Look to the minutes for discussion on the risks around the Fed's growth outlook, and by extension, its guidance that purchases will be tapered "later this year" and likely finish around mid-year 2014. Look for any discussion of potentially lowering the unemployment rate threshold from its current level of 6.5%, reflecting the fact that 6.5% unemployment now looks likely to coincide with more widespread slack in the labor market than the Committee expected at the time it introduced the guidance. In addition, discussion of how much the decision to taper will be based on the accumulated stock of economic news since the inception of QE3 (as Governor Stein recently emphasized) vs. the near-term trend in the data, will be of interest.

  • 04:10PM Chairman Bernanke speaks on economic policy

Chairman Bernanke will speak on the topic of "The First 100 Years of the Federal Reserve: The Policy Record, Lessons Learned, and Prospects for the Future." Bernanke may cite historical examples of policy mistakes in which central banks withdrew accommodation too early in justifying the current highly accommodative stance of monetary policy. It will be interesting whether the Chairman joins other Fed officials in pushing back on the market reaction since the June FOMC meeting, which appears to suggest reduced expectations for monetary accommodation (or at least more uncertainty around the Fed's commitment to easy policy) including an earlier date for the start of rate hikes. He is expected to take questions from the audience.

Thursday, July 11

  • 08:30AM Import price index, June (consensus Flat, last -0.6%)

The import price index is often influenced by month-to-month changes in petroleum prices. The consensus is expecting flat import prices in June, consistent with little change in Brent crude prices on a monthly average basis. Among major trading partners, the most notable recent change in terms of trade has occurred against Japan. Prices of Japanese imports have deflated 1.7% year-to-date, coinciding with a substantial weakening in the yen against the US dollar.

  • 08:30AM Initial jobless claims, week ended July 6 (consensus 340k, last 343k)

Continuing claims, week ended June 29 (consensus 2.958m, last 2.933m)
The consensus expects roughly unchanged initial jobless claims for the week ended July 6, a bit below the 4-week moving average of 346k. Scheduled auto plant shutdowns should push up not-seasonally adjusted claims, however the seasonal factors are anticipating an increase in the NSA figures. There is often heightened volatility in claims this time of year, as seasonal adjustment distortions around summer auto plant shutdowns can sometimes be significant.

  • 02:00PM Monthly Treasury statement, June (consensus +$40.0bn, last -$138.732bn)

The consensus expects a budget surplus for the month of June, as a large special dividend payment from Fannie Mae will augment the normal seasonal increase in receipts. The May MTS suggested an increase in seasonally-adjusted defense spending relative to April, in contrast to the recent trend. This month's MTS, the final for the quarter, should help provide further clarity on whether the sharp declines in defense spending in Q4 and Q1 persisted into Q2.

Friday, July 12

  • 08:30AM Producer price index, June (GS +0.5%, consensus +0.5%, last +0.5%)

Core producer price index, June (GS +0.06%, consensus +0.1%, last +0.1%)
Core producer prices probably rose only modestly in May, consistent with the recent trend of subdued pipeline inflation. Over the past year, core producer prices for finished goods have increased 1.7%. Energy prices likely boosted headline PPI above core in June.

  • 09:55AM University of Michigan consumer sentiment, July preliminary (GS 85.0, consensus 85.0, last 84.1)

University of Michigan consumer sentiment currently stands near a post-recession high, having recovered significantly from its fiscal cliff-induced weakness around the turn of the year. Modest gains in the stock market and a slight downtrend in retail gasoline prices in recent weeks suggest a further up-tick in confidence. The daily Rasmussen confidence indicator has weakened substantially from mid-June.

  • 05:15PM San Francisco Fed President Williams (FOMC non-voter) presents monetary policy paper

President Williams, who had specifically advocated tapering purchases as early as this summer, recently stated that it is too early to cut back on asset purchases, noting the risks posed by fiscal policy as well as below-target inflation. He will be presenting a paper titled "A Defense of Moderation in Monetary Policy." He is expected to take questions.

TDB St. Louis Fed President Bullard (FOMC voter) and Philadelphia Fed President Plosser (FOMC non-voter) participate in panel discussion

President Bullard, initially a skeptic of the size of QE3 and an advocate for rule-based tapering, dissented from the most recent FOMC decision citing significant concern about undershooting the inflation target. In contrast, President Plosser has been known for consistently hawkish monetary policy views.

Source: Goldman


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