Key Events In The Coming Week: Taxes, Inflation, Yellen, Draghi, Kuroda And Brexit

This week’s economic calendar features several key data releases and Fedspeak. The main data release in US include: CPI inflation, retail sales, industrial production, housing data and monthly budget statement. We also get the latest GDP and CPI reading across the Euro Area; the employment report in the UK and AU, Japan GDP, China IP, retail sales and FAI. In Emerging markets, there are monetary policy meetings in Indonesia, Chile, Egypt and Hong Kong.

Market participants will also want to pay close attention to tax reform progress in Washington. The House Ways and Means Committee had voted along party lines (24-16) to deliver its bill to the full House. The Senate Finance Committee’s proposal was also revealed last week and is slated for markup this week. Both versions are essentially opening gambits by the two chambers and the hard work begins when the two bills are “reconciled”. As a reminder, the Senate version is likely to be closer to the final version. In our view, there is a decent chance that some version of tax reform can be achieved, but this is likely to be a Q1 event and there are numerous potential stumbling blocks along the way.

With respect to the data, October inflation and retail sales reports are the main focus. Tuesday, DB expects headline PPI (+0.1% forecast vs. +0.4% previously) to moderate following a spike in gasoline prices last month due to hurricane-related supply disruptions. However, core PPI inflation (+0.2% vs. +0.1%) should firm. Analyst will focus on the healthcare services component of the PPI, as this is an input into the corresponding series in the core PCE deflator—the Fed’s preferred inflation metric. Recall that healthcare has the largest weighting in the core PCE.

According to Deutsche Bank, the decline in gas prices will have a similar effect on headline CPI (0.1% vs. +0.6%) released on Wednesday. Core CPI prices (+0.2% vs. +0.1%) are expected to firm but the year-over-year growth rate should remain at 1.7%, down from 2.3% at the beginning of the year. While the market anticipates core inflation to remain tame nearterm, there are signs of an inflection point on inflation. Inflation lags output growth by about six quarters, and in this regard, some of the recent weakness reflects the soft-patch in growth in late 2015/early 2016.

Regarding retail sales, the headline (+0.1% vs. +1.6%) will likely cool due to motor vehicle sales, which slipped to a still robust 18 million units in October following a surge in hurricane impacted regions of the country. Sales excluding automobiles should fare a bit better (+0.3% vs. +1.0%). Per usual, focus will fall on retail control (+0.4% vs. +0.4%), which excludes autos, building materials and gas stations and is the portion of retail sales used to estimate goods spending in GDP. Market participants should also be mindful of revisions, which can be meaningful.

There is also a spate of manufacturing data this week beginning with the New York Fed Empire survey (26.6 vs. 30.2), which could slow after reaching multiyear highs. Thursday’s Philadelphia Fed survey (23.5 vs. 27.9) is also expected to slip but still remain firmly in growth territory. The six-month outlook for capital spending in the latter survey is notable as this has been near historic highs over the past several months and is a reliable leading indicator of capex spending.

Also on Thursday, we get the October industrial production (+0.8% vs. +0.3%) report, which should post a sturdy gain given the increase in manufacturing hours worked and utilities output last month. Indeed, there could be upside risk given hurricane disruptions to the energy and chemical refining complexes.

Rounding out this week’s data releases are Thursday’s NAHB housing market index (66 vs. 68) and Friday’s housing starts (1.220 million vs. 1.127 million) and building permits (1.230 million vs. 1.225 million). There has been some recent weakness in the housing data, and given that the NAHB has come out opposed to the House GOP plans to limit the mortgage interest deduction, sentiment could slip. That said, we anticipate a modest bounce in building activity, which should get a slight tailwind near-term from rebuilding efforts in hurricane-impacted regions.

This week's Fedspeak may shed more light on monetary policymakers’ views on a December rate hike. Fed Chair Yellen and Chicago Fed President Evans (voter) appear on Tuesday at an ECB conference on “Communications Challenges for Policy Effectiveness, Accountability and Reputation”. Also speaking will be the ECB’s Draghi, BoE’s Carney and BoJ’s Kuroda. Also scheduled to speak throughout the day are the Fed’s Bullard, Evans and Bostic and the ECB’s Coeure and de Galhau. If that wasn’t enough then politics will also get its fair share of attention with President Trump due to attend the East Asia Summit and UK PM Theresa May’s Brexit legislation the subject of two days of examination in the House of Commons.

We may not get much from either given the topic. However, while Yellen appears intent on steering the FOMC in the direction of another rate hike next month,  Evans has been lukewarm given the soft-patch in inflation. We may hear more from Evans on Wednesday when he appears at a conference but his remarks will come before the CPI release. St. Louis’ Bullard (non-voter) will be speaking later Tuesday morning on the US economy and monetary policy and though he is admittedly the most dovish at the Fed, his presentations are often insightful.

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A breakdown of key global events on a day-by-day basis, courtesy of DB's Jim Reid:

  • Monday: Central bank speakers will occupy most of the focus at the start of the week with the Fed’s Harker, ECB’s Constancio and BoJ’s Kuroda all scheduled to speak. President Trump and Secretary of State Rex Tillerson are also due to take part in the US-ASEAN summit in Manilla. Data-wise the monthly budget statement in the US is the sole release. PM May will be the keynote speaker at the banquet for the City of London’s new lord Mayor. Elsewhere the Senate Finance Committee will commence mark-ups of its draft tax bill, while the House’s tax bill is expected to go to Chamber vote this Thursday / Friday.
  • Tuesday: A packed 24 hours from start to finish. The data highlights will likely be China’s industrial production, fixed asset investment and retail sales data for October, the final revisions to October CPI reports in Germany and the UK, Q3 GDP for the Euro area (second reading), US PPI for October and the late evening release of Q3 GDP in Japan. Away from the data the ECB’s Draghi, Fed’s Yellen, BoE’s Carney and BoJ’s Kuroda are all scheduled to participate on a policy panel hosted by the ECB. Also scheduled to speak throughout the day are the Fed’s Bullard, Evans and Bostic and the ECB’s Coeure and de Galhau. If that wasn’t enough then politics will also get its fair share of attention with President Trump due to attend the East Asia Summit and UK PM Theresa May’s Brexit legislation the subject of two days of examination in the House of Commons.
  • Wednesday: Another fairly packed calendar from start to finish. The overnight release in Japan includes September industrial production. In Europe we’ll receive the final October CPI report in France and the September/October employment stats in the UK. In the US the big focus will be the October CPI print while October retail sales, November empire manufacturing and September business inventories are also due. There is plenty more central bank speak scheduled with the ECB’s Lane, Praet and Hanson all due along with the Fed’s Evans and BoE’s Haldane. NAFTA negotiators from the US, Canada and Mexico are also scheduled to meet for round 5 of discussions.
  • Thursday: Following all the regional revisions during the week, Thursday will see the final October CPI report for the Euro area released. UK retail sales data for October and Q3 employment data for France will also be released.  In the US weekly initial jobless claims, Philly Fed PMI for November, import price index for October, industrial production for October and NAHB housing market index for November will be released. The BoE Carney’s, Broadbent and Haldane will all participate at a public plenary session while the ECB’s Villeroy de Galhau and Constancio are due to speak, along with the Fed’s Williams, Mester and Kaplan.
  • Friday: A slightly quieter end to the week although the ECB’s Draghi is due to give a keynote address early in the morning in Frankfurt. The Bundesbank’s Weidmann is also slated to speak while the Fed’s Williams speaks in the evening. US housing starts for October and the Kansas City Fed’s manufacturing activity index for November are the data highlights.

Finally, here is Goldman's detailed take on event just in the US, together with consensus expectations:

The key economic releases this week are the Consumer Price Index on Wednesday and the Philadelphia Fed manufacturing index on Thursday. There are several speaking engagements by Fed officials this week.

Monday, November 13

  • There are no major economic data releases.

Tuesday, November 14

  • 03:05 AM Chicago Fed President Evans (FOMC voter) speaks: Chicago Fed President Charles Evans will speak on economic and monetary policy issues at an ECB conference in Frankfurt. The topic of his remarks is “The future of Odyssean and Delphic guidance.” Audience Q&A is expected.
  • 05:00 AM Federal Reserve Chair Yellen (FOMC voter) speaks: Federal Reserve Chair Janet Yellen will participate in a panel discussion with ECB President Mario Draghi, Bank of England Governor Mark Carney, and Bank of Japan Governor Kuroda at a conference hosted by the ECB. The topic of the panel is, “At the heart of policy: challenges and opportunities of central bank communication.”
  • 06:00 AM NFIB small business optimism, October (consensus 104.0, last 103.0):
  • 08:15 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will give a speech on the U.S. economy and monetary policy at an Economic Update Breakfast jointly hosted by the Association for Corporate Growth and the St. Louis Fed in Louisville, Kentucky. Audience Q&A is expected.
  • 08:30 AM PPI final demand, October (GSe flat, consensus +0.1%, last +0.4%); PPI ex-food and energy, October (GSe +0.1%, consensus +0.2%, last +0.4%); PPI ex-food, energy, and trade, October (GSe +0.2%, consensus +0.2%, last +0.2%): We estimate a flat reading in headline PPI in October, reflecting some deceleration in core producer prices and weaker energy prices. We expect a 0.2% increase in the PPI ex-food, energy, and trade services category. The September report showed firm increases in core finished and intermediate producer prices.
  • 01:05 PM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic will give a speech on the economic outlook and monetary policy at the 35th Annual Economics Forum at Auburn University in Alabama. Audience Q&A is expected.

Wednesday, November 15

  • 03:00 AM Chicago Fed President Evans (FOMC voter) speaks: Chicago Fed President Charles Evans will speak on economic and monetary policy issues at a UBS European Conference in London. Audience and media Q&A is expected.
  • 8:30 AM CPI (mom), October (GSe +0.10%, consensus +0.1%, last +0.4%); Core CPI (mom), October (GSe +0.20%, consensus +0.2%, last +0.1%); CPI (yoy), October (GSe +2.04%, consensus +2.0%, last +2.2%); Core CPI (yoy), October (GSe +1.74%, consensus +1.7%, last +1.7%): We estimate a 0.20% increase in October core CPI (mom sa) and we expect the year-over-year rate to remain at +1.7%, though risks are skewed to the upside. Our forecast reflects stronger new car prices and a rebound in the lodging away from home category. On the other side, promotions from wireless carriers could weigh on the communications category. We estimate a 0.10% increase in headline CPI, primarily reflecting a drag from energy prices. This would leave the year-over-year rate two-tenths lower at 2.0%.
  • 08:30 AM Retail sales, October (GSe -0.1%, consensus flat, last +1.6%); Retail sales ex-auto, October (GSe +0.1%, consensus +0.2%, last +1.0%); Retail sales ex-auto & gas, October (GSe +0.3%, consensus +0.3%, last +0.5%); Core retail sales, October (GSe +0.2%, consensus +0.3%, last +0.7%): Our forecast reflects an expected pullback in grocery store sales from elevated levels likely boosted by Hurricane Irma, as well as a sequential decline in auto sales and gasoline prices. On the positive side, we expect a boost in the building materials category from post-hurricane construction activity.
  • 08:30 AM Empire state manufacturing survey, November (consensus +25.0, last +30.2)
  • 10:00 AM Business inventories, September (consensus flat, last +0.7%)
  • 04:00 PM Total net TIC flows, September (last -$125.0bn)
  • 04:00 PM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Fed President Eric Rosengren will give remarks at the Economic Policy Forum at Northeastern University in Boston.

Thursday, November 16

  • 8:30 AM Initial jobless claims, week ended November 11 (GSe 235k, consensus 235k, last 239k); Continuing jobless claims, week ended November 4 (consensus 1,910k, last 1,901k): We estimate initial jobless claims fell 4k to 235k in the week ended November 11, reflecting some normalization in a few states where claims appeared elevated in the most recent week. Continuing claims – the number of persons receiving benefits through standard programs – are expected to edge higher.
  • 08:30 AM Import price index, September (consensus +0.4%, last +0.7%)
  • 09:15 AM Industrial production, October (GSe +0.6%, consensus +0.5%, last +0.3%); Manufacturing production, October (GSe +0.5%, consensus +0.5%, last +0.1%); Capacity utilization, October (GSe 76.2%, consensus 76.3%, last 76.0%): We estimate industrial production rose 0.6% in October, recovering further after the sharp fall in August on storm-related disruptions. We expect manufacturing production rose 0.5% in October.
  • 09:10 AM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will give a keynote address at a conference on monetary policy at the Cato Institute in Washington, DC. Audience and media Q&A is expected.
  • 10:00 AM Philadelphia Fed manufacturing index, November (GSe 25.3, consensus 24.1, last 27.9): We estimate the Philadelphia Fed manufacturing index pulled back in November (-2.6pts to 25.3), though still remaining at expansionary levels, consistent with other recent manufacturing surveys.
  • 10:00 AM NAHB homebuilder sentiment, November (consensus 67, last 68)
  • 01:10 PM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will participate in a moderated Q&A at the CFA Society in Houston. Audience and media Q&A is expected.
  • 03:45 PM Fed Governor Brainard speaks (FOMC voter) speaks: Federal Reserve Governor Lael Brainard will deliver a keynote speech at a conference on FinTech at the University of Michigan.
  • 04:30 PM New York Fed Executive Vice President Potter speaks: New York Fed Executive Vice President Simon Potter will give a speech on the Fed’s balance sheet at the Federal Reserve Bank of New York.
  • 04:45 PM San Francisco Fed President Williams (FOMC non-voter) speaks: San Francisco Fed President John Williams will give the keynote speech at the San Francisco Fed’s 2017 biennial Asia Economic Policy Conference. Audience and media Q&A is expected.

Friday, November 17

  • 8:30 AM Housing starts, October (GSe +5.0%, consensus +5.8%, last -4.7%): We estimate housing starts rose 5.0% in October, reflecting recovery from the disruptions related to Hurricanes Harvey and Irma, which likely lowered starts in September in the South region. While the impact of higher mortgage rates has likely weighed on single family demand and construction this year, we suspect this drag is now waning (particularly given the pullback in mortgage rates since March).
  • 11:00 AM Kansas City Fed manufacturing index, November (consensus +20, last +23):
  • 05:30 PM San Francisco Fed President Williams (FOMC non-voter) speaks: San Francisco Fed President John Williams is scheduled to speak with reporters present at he San Francisco Fed’s 2017 Asia Economic Policy Conference.

Source: BofA, DB, GS