|
|
Get Four
|  | JULY 9, 2004
Vital Signs for the Week of July 12 On tap: June industrial production, June figures on consumer, producer, and import and export prices, regional manufacturing activity surveys, and more In the coming months, economists and the bond market will be keeping a close eye on inflation measures. Just how fast prices continue to rise will be an important factor in future interest rate decisions by the Federal Reserve. Currently, Fed Chairman Alan Greenspan is not overly concerned about accelerating prices. The June 30 statement following the latest monetary policy meeting said that, "although incoming inflation data are somewhat elevated, a portion of the increase in recent months appears to have been due to transitory factors." The latest batch of inflation data expected this week would seem to point in Greenspan's favor. The consensus of economists surveyed by Action Economists is that June increases in the three major inflation reports due this week -- consumer prices, producer prices, and import and export prices -- should all be less than May. Headline inflation numbers should begin to reflect the easing in oil prices. After peaking at $42 per barrel at the start of June, oil fell to $37 per barrel at the end of the month. Oil is now back to $40 per barrel on fears of supply disruptions. However, production by Saudi Arabia and other Organization of the Petroleum Exporting Countries (OPEC) has increased. OPEC also pledged to hike production to 26 million barrels per day starting in August, an official daily increase of 500,000 barrels from current levels. In addition, any reduced demand by energy hungry China resulting from the government's efforts to cool the economy would help reduce demand pressures. Oil is not the only commodity to show easing prices. Raw materials prices are also coming down. The Commodities Research Bureau's price indexes tracking industrial commodities, such as metals, and food items, such as beef, corn, and wheat, are coming down from multi-year highs. Since topping out in early April, the raw industrials index has fallen by 5.5%. The index tracking food items is down 7% from a late March peak. The trend has also shown up in the producer price index, with prices of crude goods, less food and energy, falling by nearly 4% in both April and May. To be sure, prices of raw materials did rise for a long time and businesses will keep trying to pass along those higher costs onto their customers. However, the ability to do so should remain muted. That's because prices of competing goods from abroad are not rising very much. Import prices for a majority of goods remain subdued. In May, prices of imported capital goods were off 1% from a year ago, consumer goods prices were up 0.6% over the same time, and prices of imported vehicles and related parts rose just 1.3%. Those three groups account for a majority of imported goods. If the trends continue, it would be good news for just about everyone. Businesses would get a reprieve from higher input costs that were putting pressure on profit margins. Consumers would pay less at the gas pump. And the Fed will not look like it is behind the curve on inflation. That would give the central bank more time raise interest rates on its own terms. Here's the weekly economic calendar. EARNINGS REPORTS Monday, July 12 Cintas, GenCorp, M&T Bank, Micrologix Biotech, Novellus Systems, SunTrust, and more. MEETINGS OF NOTE Tuesday, July 13, 2 p.m. EDT The U.S. House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises holds a hearing on the Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal Housing Finance Board in Washington, D.C. 3 p.m. EDT Federal Reserve Bank of Dallas President Robert D. McTeer speaks at an Executive Women's Alliance Conference for Senior Executive Women in Vancouver, Canada. 7 p.m. EDT Federal Reserve Bank of Kansas City President Thomas Hoenig speaks about monetary policy and the economic outlook to business leaders in Kansas City. EARNINGS REPORTS BB&T, Gannett, Intel, Johnson & Johnson, Juniper Networks, Raymond James, Yum! Brands, and more. ICSC-UBS STORE SALES Tuesday, July 13, 7:45 a.m. EDT 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 July 10. In the week ended July 3, seasonally adjusted sales rebounded with a 0.9% gain, after slipping by 1.2% in the week ended June 26, and a slight gain of 0.1% in the week ended June 19. INTERNATIONAL TRADE Tuesday, July 13, 8:30 a.m. EDT The U.S. trade deficit for goods and services during May most likely held at $48.3 billion. That's the consensus forecast of economists surveyed by Action Economics. The trade gap in April widened to a record $48.3 billion, after posting a $46.6 billion deficit in March. Oil was not a big factor in the April results. The seasonally adjusted dollar amount of imported crude oil was down $962 million from March, nearly a 10% decline. Many other energy imports were also down from the previous period. The big reason for the record trade gap was a sharp drop in exports. In April, exports fell by $1.5 billion, or 1.6% on the month. However, exports have been on a strong upward trend. Despite the recent setback, exports of goods shipped abroad were still up 14.7% from a year ago. Exports of services actually improved, rising 17.5% from last April, compared with a 14% yearly gain in March. INSTINET REDBOOK RESEARCH STORE SALES Tuesday, July 13, 8:55 a.m. EDT This weekly measure of retail activity will report on sales for the first fiscal week of July, ended July 10. During the fifth and final week of June, sales were off 0.2% compared with all of May. For May, sales stood 0.5% higher when compared with April. RICHMOND FED SURVEY Tuesday, July 13, 10 a.m. EDT The Richmond Federal Reserve Bank will release its June survey of business conditions in the Richmond Fed district. The manufacturing activity index rebounded to 22, from 13 in April, but remained below the March level of 30. The new orders index, however, eased for a second straight month, falling to 12, from 17 in April. Unfilled orders actually fell, according to the survey. The index came in at 1 for May, vs. 9 in April and 11 in March. Respondents were also more tempered in their outlook for the coming six months. The shipments reading of 16 was down from 22 in April. Expectations for new orders and unfilled orders were also not as rosy as in April. To be sure, the absolute levels are still good. And activity remains robust enough to warrant more hiring. Also of interest is the change in inflation expectations. After reporting that prices rose by an annualized rate of 3.1% in April, manufacturers said the May gain was 2.2%. Respondents also finally expect to get some real pricing power in the coming months. In May, prices for inputs such as raw materials are expected to increase by an annualized pace of 2.7% over the next half year. However, prices received for goods sold by the respondents are seen growing at a 2.9% clip. It's the first time since 1997 that prices received are anticipated to rise at a faster pace than input prices. However, such occurrences haven't lasted very long. EARNINGS REPORTS Wednesday, July 14 Advanced Micro Devices, Apple Computer, Bank of America, Edgewater Technology, Harley-Davidson, QLogic, Ruby Tuesday, The New York Times Company, and more. MORTGAGE APPLICATIONS Wednesday, July 14, 7 a.m. EDT The Mortgage Bankers Assn. releases its tally of mortgage applications for both home buying and refinancing for the week ending July 9. In the week ended July 2, the purchase index moved up to 500.9, the best reading since January. The index slumped to 435.4 in the week ended June 25, after rising to 454.5 in the previous week. The latest reading of the four-week moving average bounced up to 460.1, after sliding to 442.9, the lowest level since late March. The average rate on a conventional 30-year mortgage, according to HSH Assoc., eased back to 6.35% for the week of July 2, from 6.37% in the week ended June 25. The latest pickup in mortgage activity is most likely related to the recent easing in mortgage rates. The refi index also rose in the week ended July 2, to 1769.7. In the week of June 25, refi activity slowed, with the index falling to 1386.9, from 1454.6 in the previous period. The refi index four-week moving average moved up to 1522.7, from 1421 in the week ended June 25. RETAIL SALES Wednesday, July 14, 8:30 a.m. EDT Retail sales growth probably fell 0.6% during June, say economists queried by Action Economics. A weak month for auto sales is a primary reason for the expected retreat. After auto sales in May hit an annual pace of 17.8 million, June results came in at a rate of 15.4 million. The June tally was the lowest monthly figure since August of 1998. In May, retail sales rallied by 1.2%, following a 0.6% decline in April. Based on the June forecast, retail sales would be up by 7.0% on an annualized basis for the second quarter, after growing by 9.7% in the first quarter, and 4.5% in the final quarter of 2003. Excluding vehicles, May sales are expected to have risen by 0.2%. In May, sales less motor vehicles climbed by 0.7%, following a small fall of 0.1% in April. Based on the expected June gain, retail sales less autos would be up an annualized 7.9% in the second quarter, after 11.9% surge in the previous quarter. Another key factor lately has been sales at gasoline stations. Since sales are measured in dollars and not in volume terms, escalating gasoline prices have had a sizeable impact. May gas station sales were up 4% from April, and 22.5% from a year ago. With gas prices now declining, sales gains at gas stations should also slow. IMPORT AND EXPORT PRICES Wednesday, July 14, 8:30 a.m. EDT Import prices in June most likely rose by 0.3%, according to economists surveyed by Action Economics. In May, import prices shot up 1.6%, following a 0.2% increase in April, and a 0.8% increase during March. Excluding petroleum imports, however, May import prices grew by a more subdued 0.4%, following a 0.3% gain in April, and a 0.2% rise in March. Export prices probably moved up by 0.2%, following a 0.3% increase in May, and a sizeable jump of 0.7% in April. Export prices have been trending higher due in large part to surging agricultural prices. Export prices for agricultural items are up 20.9% from a year ago in May, slightly off the yearly pace of 23.9% in April. FEDERAL BUDGET Wednesday, July 14, 2 p.m. EDT The Treasury Dept. releases the details on the government's budget for June, the ninth month of fiscal year 2004. The median forecast of economists surveyed by Action Economics is for a surplus of $16.5 billion. In May, the Treasury reported a $62.7 billion deficit, following a $17.6 billion surplus in the previous period. In June of 2003, the government rang up a $21.2 billion surplus, after an $88.9 billion deficit in May. Tax receipts this fiscal year are up compared with fiscal 2003. Through May, net receipts stood at $1.19 trillion, compared with just under $1.16 trillion through the same period in fiscal 2003. However, spending has risen at a faster clip. Outlays through May of fiscal 2004 are at $1.53 trillion, compared with $1.45 trillion in the same period in fiscal 2003. The overall deficit for fiscal 2004 through May is at $344.3 billion, vs. $290.9 billion at the same point last year. MEETING OF NOTE Thursday, July 15 The Office of Management and Budget releases its annual Mid-Session Review of the U.S. budget in Washington, D.C. 8 p.m. EDT Federal Reserve Board Governor Susan Schmidt Bies speaks about business financial conditions and relationships with bankers at a Financial Executives International Chicago Chapter dinner in Chicago. EARNINGS REPORTS Thursday, July 15 Audiovox, Citigroup, Dow Jones & Company, Eaton, Equitable Resources, Fifth Third Bancorp, Marriott International, Nokia, PepsiCo, PPG Industries, Southwest Airlines, Tribune, Unisys, UnitedHealth Group, and more. PRODUCER PRICE INDEX Thursday, July 15, 8:30 a.m. EDT The median forecast of economists queried by Action Economics has producer prices of finished goods rising by 0.2% in June, after big gains of 0.8% in May, 0.7% in April, and 0.5% in March. Using the June consensus figure, producer prices would be up 4.5% from a year ago, compared with a yearly gain of 4.9% in May. Excluding food and energy costs, core prices probably rose by 0.2% as well. During May, core producer prices moved up 0.3%, after two straight 0.2% gains in April and March. Based on the June forecast, core producer prices would be up 1.9% from the same period a year ago, a slight increase from the 1.7% yearly gain in May. JOBLESS CLAIMS Thursday, July 15, 8:30 a.m. EDT First-time claims for jobless benefits for the week ended July 10 probably rebounded to 343,000, according to the consensus forecast of economists surveyed by Action Economics. Jobless claims dropped to 310,000, from a downwardly revised level of 349,000 for the week ended June 26, and 349,000 in the week ended June 19. The latest number should come as a relief to those who may have been concerned about the recent rise in new claims. Although jobless claims had been higher the past few weeks, they were still at levels that corresponded with steady job gains. The four-week moving average retreated to 336,000, from 346,300 over the week ended June 26. Also during the week of June 26, continuing jobless claims fell to 2.87 million, from 2.96 million over the prior period. BUSINESS INVENTORIES Thursday, July 15, 8:30 a.m. EDT Inventories held by manufacturers, wholesalers, and retailers very likely increased by 0.5% in May, according to the consensus forecast of economists surveyed by Action Economics. In April, inventories increased 0.5%, following a 0.7% gain in March, and a 0.8% jump in February. Factory inventories were already reported up 0.5% for May, while wholesalers reported a 1.2% leap for the same period. EMPIRE STATE MANUFACTURING SURVEY Thursday, July 15, 8:30 a.m. EDT The New York Federal Reserve Bank will release its July survey of business conditions for manufacturers in the New York Fed district. According to Action Economics, the manufacturing index probably eased to 28, from 30.2 in both June and May. The new orders index dropped a bit, falling to 26.5 in June, from 36.6 in May. The June result indicates that new orders are still growing, but at a slower pace. The new orders slowdown may be having an effect on manufacturers' ability to catch up with demand. The unfilled orders index also eased to 10, from 15.7 in May. Work is still backing up, but just not at the same clip as in May. Solid demand has manufacturers hiring, just not as briskly as indicated in the May survey. In June, 21.5% of respondents said they increased payrolls, compared with 28% in May. Fewer manufacturers say they plan to lay off workers, while nearly 40% plan to increase payrolls in the next six months. INDUSTRIAL PRODUCTION Thursday, July 15, 9:15 a.m. EDT Industrial output probably inched up 0.1% in June, according to the consensus forecast of economists surveyed by Action Economics. In May, factory output expanded 1.1%, following a healthy 0.8% jump in April. Based on the June forecast, industrial production growth from a year ago should move up a tick to 6.4%. The average operating rate for all industries probably slipped to 77.7% during June, from 77.8% in the previous month, and 77.1% in April. The regional and national factory activity reports still indicate increasing factory output in the coming months. That should help eliminate more idle capacity, especially with additional capacity coming on line at a minimal rate of just above 1% during the past several months. PHILADELPHIA FED SURVEY Thursday, July 15, 12 p.m. EDT The Philadelphia Federal Reserve Bank will release its July survey of business conditions for the mid-Atlantic region. The median forecast of economists surveyed by Action Economics calls for the index of general business conditions to come in at 26.3. In June, the index rose to 28.9, from 23.8 in May, but remained below the 32.5 reading for April. The pace of new orders and shipments picked up, reaching 24 in June, from 18.3 in May. As a possible result of the stronger June orders volume, respondents said unfilled orders increased more quickly than in May. Unlike the most recent figures from the New York and Richmond Fed surveys, manufacturers in the Philly Fed survey toned down their hiring, and lowered their expectations for hiring for the second half of 2004. However, far more manufacturers still plan on adding jobs than trimming payrolls. The Philly Fed also posed a special question in the June report, asking what best characterized a respondent's capacity utilization rate now and six months ago. More than 60% said their plant's utilization rate was 75% or less six months ago. However, 64% said utilization is now above 75%. MEETING OF NOTE Friday, July 16, 9 a.m. EDT Federal Reserve Board Governor Susan Schmidt Bies discusses corporate governance at a Risk Management Assn. conference in Chicago. EARNINGS REPORTS Friday, July 16 Delphi, Hasbro, KeyCorp, National City, and more. CONSUMER PRICE INDEX Friday, July 16, 8:30 a.m. EDT Consumer prices for all goods and services are forecast to have increased by 0.2% in June, according to economists surveyed by Action Economics. Consumer prices climbed 0.6% in May, following a 0.2% increase during April. The main culprits for the strong May gain were energy and food. Gasoline prices shot up 8.1%, according to the Commerce Dept. report, while meats and poultry jumped 1.6% and dairy products surged 6.8%. Based on inflation expectations for June, yearly inflation probably held at 3.1%. The yearly inflation rate should remain stable or even ease a bit during the summer, as long as oil prices creep lower. Less food and energy, consumer prices probably rose by a similar 0.2% over June. During May, the less volatile measure of core inflation posted a 0.2% rise, after a 0.3% gain for April. Based on the June forecast, yearly core inflation should move up to 1.9%, from 1.7% in May. A likely downward influence on the CPI during the next couple of months will come from the auto sector. An uncomfortably high level of inventories are leading auto makers to ratchet up incentives, effectively lowering the cost of a new vehicle. Following the weak June auto sales results, both General Motors and Ford announced a new round of incentives. REAL EARNINGS Friday, July 16, 8:30 a.m. EDT Inflation-adjusted weekly earnings of production workers in June probably nudged up 0.1%, as average weekly earnings rose 0.3% during June and the consumer price index for June is forecast to have risen by 0.2%. Real earnings in May fell 0.4%, following a scant 0.1% gain in April, and a 0.3% decline for March. Compared with the same period a year ago, real earnings in May were down by 0.5%. CONSUMER SENTIMENT INDEX Friday, June 16, 10 a.m. EDT The University of Michigan's Survey Research Center will report its initial index reading of consumer sentiment for July. The consensus forecast of economists queried by Action Economics is for an improvement to 96.4. In June, the index rose to 95.6, from 90.2 in May, and 94.2 in April. According to survey director Richard Curtin, the recent job gains are more than offsetting any concerns about rising interest rates. Beyond the gain posted in June, the University of Michigan survey also reported that consumers now believe that gasoline prices have hit a peak. That's good news for potential consumer spending in the months ahead, especially if prices continue to decline after slipping 8% from the recent high of $2.06 per gallon in mid-May.  By James Mehring
BW MALL
SPONSORED LINKS
Get BusinessWeek directly on your desktop with our RSS feeds.
Buy a link now! Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2004, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version
