Vital Signs: Will Inflation Keep Easing?

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MEETINGS OF NOTE

Wednesday, May 16, 9 a.m. EDT - Federal Reserve Bank of Philadelphia President Charles Plosser moderates a panel discussion on "Credit Derivatives: Macro-Risk Issues" as part of the Atlanta Fed's Financial Markets Conference entitled "Credit Derivatives: Where's the Risk?"

11 a.m. EDT - Federal Reserve Board Vice Chairman Donald Kohn will take part in a panel discussion at the Atlanta Fed's Financial Markets Conference entitled "Credit Derivatives: Where's the Risk?"

1 p.m. EDT - Federal Reserve Bank of Dallas President Richard Fisher speaks about globalization and the economic outlook at an economic conference at the Neeley School of Business at Texas Christian University.

MORTGAGE APPLICATIONS - Wednesday, May 16, 7 a.m. EDT

The Mortgage Bankers Association releases its mortgage application volume data for home buying and refinancing activity for the week ending May 11. In the week ended May 4, the purchase index grew to 438.3, a third straight weekly gain and the highest level since early January. The refi index improved to 2115.2, from 2015.8 in the week ended Apr. 27.

The four-week moving average for the purchase index was 418.3, up from 412.2. The four-week average for the refi index drifted up to 2055.2, from 2030.2. The average 30-year fixed-rate mortgage retreated to 6.10% from 6.14% in the prior period.

NEW RESIDENTIAL CONSTRUCTION - Wednesday, May 16, 8:30 a.m. EDT

Housing starts probably declined a little further in April, but will likely reinforce a picture that residential construction is in the early stages of stabilizing. Housing starts in March stood at annual rate of 1.52 million, from 1.51 million in February. Starts were off 23% from a year ago in March, after a yearly drop of 29.4% in February.

Housing permits edged up a little in March, which is a positive sign for the housing market. Permits are needed to start a home, so any sign that the decline in authorizations is finally leveling off means starts should do the same in the near future.

Further down the building process, homes under construction and completions could keep declining for a little while longer. The number of homes under construction fell 1.1% in March, while completions edged down 0.7%. Compared to last March, the number of homes under construction is down 15.8%, while completions are down 25.9%.

INDUSTRIAL PRODUCTION - Wednesday, May 16, 9:15 a.m. EDT

Industrial output most likely bounced back with a 0.3% increase. That's the consensus estimate among economists queried by Action Economics. Overall industrial production fell 0.2% in March, but that was due to a weather-related plunge in utility output. Factory production actually rose 0.7%, although overall output in the past three months was revised down a little.

Business equipment jumped 0.8% during March. The business equipment category is very important since it provides a sense of business investment demand. In addition, construction supplies rebounded 1.2%.

With industrial activity expected to improve, the capacity utilization rate should also rise. In March, the rate slipped to 81.4%, from 81.6%. In manufacturing, the rate climbed to 80.1%, from 79.7% in January.