Vital Signs for the Week of Sept. 6


This week could provide a glimpse of whether or not the Federal Reserve has changed its view on the economy before its next monetary policy meeting on Sept. 21. Federal Reserve Chairman Alan Greenspan will discuss the economy and fiscal matters in testimony before Congress. In addition, the Federal Reserve releases its Beige Book summary of regional economic activity.

In the Aug. 10 post-meeting press release, the Federal Reserve pinned the recent economic soft patch on higher energy prices. Ultimately, the central bank said, economic growth would pick up as the year winds down. That's because the recent gains in inflation shouldn't be a big problem because recent increases reflect only temporary factors. And a large part of the temporary price pressures has been energy.

The Federal Reserve's view of inflation will meet a test with the Labor Day weekend now here. The holiday marks the end of a busy summer holiday travel season. That means gasoline demand should fall off, reducing some price pressures on oil. If so, it would help ease inflationary pressures and could help consumer confidence and spending.

At the same time, oil and gasoline prices are affected by supply and there's a still lot of uncertainty. The late August easing in crude prices was due in large part to easing concern over supply issues in Iraq. Now, possible disruptions in Russia could prevent further price declines.

Energy prices are gaining importance. Although the Federal Reserve prefers to look at core inflation, which strips out food and energy prices, the duration of elevated energy prices appear to be impacting the economy, especially consumers. Monthly chain-store sales were soft, as retailers blamed energy prices for the weak back-to-school sales. The dip in August auto sales figures was also partly attributed to energy.

But the Federal Reserve is likely to put a lot of weight on the latest labor market data. The job market is in better shape than some feared. Nonfarm payrolls rose by 144,000 over the month, while the number of new jobs added in July was revised up to 73,000. What's more, average weekly wages are rising, up 0.3% from July and 2.9% from a year ago. The Labor Dept.'s personal income report is also showing a steady rise in wages and salaries. An improving labor market is necessary to fuel consumer spending.

Overall, economists surveyed by Action Economics still believe the Federal Reserve will raise interest rates later this month. The median forecast is for another 25-basis-point rise. However, economists believe the Federal Reserve will take a break later this year.

Labor Day will make for a short week. The financial markets and government offices will be closed on Monday, Sept. 6.

Here's the weekly economic calendar.

MEETING OF NOTE

Tuesday, Sept. 7.

The Congressional Budget Office will release a summer update of the U.S. budget and economic outlook in Washington.

EARNINGS REPORTS

Neiman Marcus Group, Seagate Technology, and more.

MEETING OF NOTE

Wednesday, Sept. 8, 10:30 a.m. EDT

Federal Reserve Board Chairman Alan Greenspan will discuss the economy and fiscal issues as part of his testimony before the House Budget Committee in Washington.

EARNINGS REPORTS

Dave & Buster's, Korn Ferry International, and more.

MORTGAGE APPLICATIONS

Wednesday, Sept. 8, 7 a.m. EDT

The Mortgage Bankers Association releases its tally of mortgage applications for both home buying and refinancing for the week ending Sept. 3. In the week ended Aug. 27, the purchase index edged down to 443.1, from 443.7 in the prior week, and 467.1 in the week ended Aug. 13. The latest reading of the four-week moving average declined to 448.5, after narrowly declining to 450.7, from 451 in the week ended Aug. 13.

The average rate on a conventional 30-year mortgage, according to HSH Associates, was virtually unchanged at 5.97% in the week of Aug. 27. Over the week ended Aug. 20, the rates stood at 5.96%.

The refi index also declined. Over the week ended Aug. 27, the index slowed to 1804.1, from 1824.9 in the week ended Aug. 20, and 1982.7 in the previous period. The refi index four-week moving average, however, rose to 1813.1, from 1762.1 in the period ended Aug. 20.

ICSC-UBS STORE SALES

Wednesday, Sept. 8, 7:45 a.m. EDT

This weekly tracking of retail sales, assembled by the International Council of Shopping Centers and UBS, will update buying activity for the week ending Sept. 4. In the week ended Aug. 28, seasonally adjusted sales slipped 0.2%, after rising 0.1% in Aug. 21, and falling 0.6% in the previous period.

INSTINET REDBOOK RESEARCH STORE SALES

Wednesday, Sept. 8, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales for the first fiscal week ending Sept. 4. For the full month of August, sales fell 1.1%, after July sales dropped 0.1% from June.

BEIGE BOOK

Wednesday, Sept. 8, 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 in advance of the upcoming two-day monetary policy meeting scheduled for Sept. 21. Despite the economy hitting a soft patch, the Federal Reserve is expected to lift rates by another quarter percentage point, to 1.75%. That's the median forecast of economists surveyed by Action Economics.

CONSUMER INSTALLMENT CREDIT

Wednesday, Sept. 8, 3 p.m. EDT

Consumers probably racked up an additional $7 billion of debt in July. That's the consensus forecast of economists queried by Action Economics. Total credit outstanding increased by $6.6 billion in June, following an $8 billion rise in May, and a $5.9 billion gain in April.

Growth in consumer debt was 3.4% at an annualized rate in the second quarter. That was the slowest increase since the final quarter of 2002. In the first quarter, debt increased at an annual rate of 6.4%. The gains are coming largely from the nonrevolving segment, which includes car loans. Over the April to June period, nonrevolving debt rose by an annualized rate of 6.4% for a second straight period. However, revolving debt, made up largely of credit-card debt, declined by an annualized rate of 1.7%.

MEETING OF NOTE

Thursday, Sept. 9, 4:00 p.m. EDT

Federal Reserve Bank of San Francisco President Janet Yellen discusses the U.S. economic outlook and monetary policy before business and community leaders in Seattle.

EARNINGS REPORTS

Joseph A. Bank Clothiers, National Semiconductor, Samsonite, and more.

JOBLESS CLAIMS

Thursday, Sept. 9, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended Sept. 4 are expected to ease back to 349,000, according to the median forecast of economists surveyed by Action Economics. Jobless claims jumped to 362,000 over the period ended August 28, from 343,000 in the week ended Aug. 21, and 333,000 for the prior period. The Labor Dept. said an additional 2,645 claims were submitted in Florida as the direct result of Hurricane Charley.

The four-week moving average climbed to 343,000, from 336,800, over the week ended Aug. 21. Over the week of Aug. 21, continuing jobless claims held at 2.9 million.

IMPORT AND EXPORT PRICES

Thursday, Sept. 9, 8:30 a.m. EDT

Oil prices touching $48 per barrel probably pushed import prices a bit higher. Economists queried by Action Economics expect an August increase of 0.6%. In July, prices rose 0.2%, following a 0.1% energy-driven slip in the index. Excluding petroleum, import prices rose 0.1% in July. Energy prices have been the driving force in higher import prices. Compared to the same period a year ago, overall import prices rose 5.5% in July. Excluding energy, prices of foreign made goods climbed just 2.6%.

Outside of energy, imports are helping to keep a lid on inflation for the time being. The prices of imported capital goods fell 1.7% from a year ago in July, and nonauto consumer goods are just 0.4% higher from a year ago.

Export prices are forecast to increase by 0.3%, after rising 0.4% in July, and falling 0.7% in June. Compared to a year ago, export prices jumped 4.4%, and 3.9% in June. The July figures showed prices of capital goods are turning around. Capital goods exports rose 0.5% from a year ago in July, and 0.5% in June -- the first yearly gain since 2001.

WHOLESALE SALES AND INVENTORIES

Thursday, Sept. 9, 10 a.m. EDT

Wholesale sales probably increased 0.6% in July. That's the consensus estimate of economists queried by Action Economics. In June, sales were unchanged, after rising 0.3% in the prior month, and 0.9% in April. Based on the July forecast, sales likely came in at an annual pace of 13.5%, slightly down from 14% in June.

June wholesale inventories grew by 1.1%, after rising 1.4% in May. The latest figures pushed the inventory-to-sales ratio up slightly, to 1.15, from 1.14 in May. Inventories continue to grow, but not at the pace some economists had expected. What's more, businesses may increasingly feel the need to ratchet up warehouse restocking if the economy accelerates from the slowdown in the second quarter.

MEETING OF NOTE

Friday, Sept. 10, 12:00 p.m. EDT

Federal Reserve Bank of St. Louis President William Poole takes part in a panel discussion on global trade in Clayton, Missouri.

PRODUCER PRICE INDEX

Friday, Sept. 10, 8:30 a.m. EDT

Prices for goods and commodities sold by U.S. businesses are expected to have accelerated. The consensus among economists surveyed by Action Economics is for a 0.2% increase in the prices of finished goods in August. In July, producer prices edged up 0.1%, after slipping 0.3% in June, and surging 0.8 % in May. Based on the August forecast, producer prices would be 3.7% from a year ago, after holding at 4% in July.

Excluding food and energy costs, core prices probably rose by 0.1%. During July, core producer prices moved up 0.1%, after rising 0.2% in June. Based on the August forecast, core producer prices would hold at 1.8% from the same period a year ago.

INTERNATIONAL TRADE

Friday, Sept. 10, 8:30 a.m. EDT

The monthly trade deficit probably narrowed from last month's record level, but not by much. The U.S. trade deficit for goods and services is expected to be $51.5 billion in July. That's the median estimate of economists surveyed by Action Economics. In June, the deficit hit $55.8 billion, after narrowing to $46.9 in May, from $48.1 billion during April. Both a decline in exports and a jump in imports caused the record June gap.

In June, exports fell to $92.8 billion, from a record level of $97.1 billion in May. The decline was led by civilian aircraft exports. Even so, the weakness in exports was widespread. Economists expect the data to show some improvement in exports during July.

Imports hit $148.6 billion, from $143.1 billion in May. Increasing energy imports accounted for more than half of the increase. Since imports and exports are measured by value, not volume, rising oil prices pushed the import total higher. Economists expect the July level of imports to remain steady, but a further run-up in oil prices over July could push the level higher. By James Mehring


Steve Ballmer, Power Forward
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