Vital Signs for the Week of Oct. 4


Consumer spending appears to have improved in the third quarter. And a better labor market and steady gains in income should continue to underpin household spending.

An easing in spending by consumers was the big reason for the soft patch in the economy earlier this year. That slowdown appears to have been a reaction to higher oil prices, concern about inflation, and some lingering uncertainty about the labor market. More recently, consumers have been confronted by a harsh hurricane season and another spike in oil prices.

Even so, household spending looks to be improving. The Commerce Dept. showed that monthly consumer spending in August was flat. However, the July number was revised higher. Overall, spending in the third quarter is on pace to grow by an annualized 4%. That's far better than the 1.6% in the second quarter and even more impressive given the especially tough hurricane season this year, although a large share of any weather related effects aren't likely to show up until the September reports.

The earliest indications from weekly retail sales reports have been mixed of late. The monthly chain store sales report should provide a clearer indication of how much spending may have been effected.

Consumers should be well equipped to keep spending in the fourth quarter. Personal income rose by 0.4% in August. This year's higher oil prices have indeed sapped some consumer purchasing power. Even so, inflation-adjusted income is still growing. The danger is that costlier gasoline and heating oil could squeeze purchasing power in coming months.

What's more, economists surveyed by Action Economics are calling for a solid, if unspectacular, increase in September payrolls. The median forecast is for a gain of 150,000 jobs in September. That number could come in weaker, once again attributable to hurricanes that affected a large part of the eastern United States.

However, the latest manufacturing activity surveys were positive when it came to employment. The September Chicago regional activity survey showed an uptick in hiring, as did the Institute for Supply Management's national survey.

Here's the weekly economic calendar.

MEETING OF NOTE

Sunday, Oct. 3, 3:30 p.m. EDT

Federal Reserve Board Governor Mark Olson speaks about Check 21, a federal law intended to allow private banks to process more checks electronically. The presentation will be at American Bankers' annual convention in New York City.

MEETING OF NOTE

Monday, Oct. 4, 8 a.m. EDT

Federal Reserve Bank of Philadelphia President Anthony Santomero speaks about monetary policy and international trade at a conference by the National Association for Business Economics in Philadelphia.

11 a.m. EDT

Federal Reserve Board Governor Susan Schmidt Bies discusses risks within the international financial system at a National Association for Business Economics conference in Philadelphia.

MANUFACTURERS' SHIPMENTS, INVENTORIES, AND ORDERS

Monday, Oct. 4, 10 a.m. EDT

Factory orders most likely moved up by 0.2% in August. That's the median forecast of respondents queried by Action Economics. Published data on new orders for durable goods showed a fall of 0.5% for August. However, the overall tally of durable goods orders was dragged down by the transportation sector, where airplane orders returned to more normal levels. Since the same pattern is likely to show up in the factory orders report, it may prove to be more informative to look at how orders less the transportation sector performed.

In July, factory orders rose 1.3%, after a 1.2% jump in June and a 0.4% gain in May. After some weakness in the spring, particularly the 1.1% drop in April orders, businesses appear to be spending at a hearty clip once again.

Looking at the durable goods report, unfilled orders rose by 0.3% in August. The factory report will show a similar number since there are no unfilled orders reported for non-durable goods. Unfilled orders rose by 1.2% in July, after two consecutive monthly increases of 0.6%.

MEETING OF NOTE

Tuesday, Oct. 5

A debate between Vice President Dick Cheney and Senator John Edwards will be held at Case Western Reserve University in Cleveland, Ohio.

EARNINGS REPORTS

Tuesday, Oct. 5

Apollo Group, Yum! Brands, and more.

ICSC-UBS STORE SALES

Tuesday, Oct. 5, 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 Oct. 2. In the week ended Sept. 25, seasonally-adjusted sales were down 0.3%, after a 1.1% drop in the previous week. The recent declines are being blamed on hurricanes and higher energy costs.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, Oct. 5, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales for the fifth and final fiscal week of September, ending Oct. 2. During the first four weeks, sales were up 0.9% compared with the same period in August. For the full month of August, sales were off 1.1%, after July sales dropped 0.1% from June.

ISM NON-MANUFACTURING SURVEY

Tuesday, Oct. 5, 10 a.m. EDT

The Institute for Supply Management releases its September index of business activity in the mostly services, non-manufacturing sector. The median forecast of economists surveyed by Action Economics is a reading of 59.5%. In August, the index fell more than expected, to 58.2%, from 64.8% in July, and 59.9% in June.

The August decline was accompanied by falls in the new orders and backlog orders indexes. The new orders index retreated to 58.6%, after jumping to 66.4% in July, from 62.4% in June. The unfilled orders index slipped to 53%, from 55% in July, and 55.5% in June.

However, the employment index improved, rising to 52.5%, from 50% in July, the official inflection point between rising and falling payrolls. In June, the index stood at 57.4%.

MEETING OF NOTE

Wednesday, Oct. 6, 10:30 a.m. EDT

Federal Reserve Board Chairman Alan Greenspan speaks at the American Bankers' Association annual convention in New York City.

1 p.m. EDT

Federal Reserve Bank of St. Louis President William Poole speaks at the Ozark Chapter of the Society of Financial Services Professionals in Springfield, Missouri.

8:45 p.m. EDT

Federal Reserve Bank of Kansas City President Thomas Hoenig speaks about monetary policy and the economic outlook to bank and business leaders in Lincoln, Nebraska.

EARNINGS REPORTS

Wednesday, Oct. 6

Genentech, Monsanto, and more.

MORTGAGE APPLICATIONS

Wednesday, Oct. 6, 7 a.m. EDT

The Mortgage Bankers Association releases its tally of mortgage applications for both home buying and refinancing for the week ending Oct. 1. In the week ended Sept. 24, the purchase index hit 469.1, after increasing to 456.6 in the prior period, from 455.7 in the week ended Sept. 10. The latest reading of the four-week moving average moved up to 464.4, from 457.9 in the period ended Sept. 17.

The average rate on a conventional 30-year mortgage, according to HSH Associates, fell back to 5.83%, from 5.86% in the week of Sept. 17.

The refi index posted its fourth consecutive gain, jumping to 2211.1, from 2052.5 in the week ended Sept. 17, 1972.5 in the prior week, and 1948.9 in the week ended Sept. 3. The refi index four-week moving average climbed to 2046.3 for the week ended Sept. 24, from 1944.5.

MEETING OF NOTE

Thursday, Oct. 7, 8 a.m. EDT

Federal Reserve Bank of Cleveland President Sandra Pianalto gives a keynote speech at the Cincinnati USA Partnership's Annual Economic Outlook and Business Summit in Cincinnati, Ohio.

9:30 a.m. EDT

Federal Reserve Board Vice Chairman Roger Ferguson gives the keynote address entitled, "Trade and the Future of American Workers" at a conference in Washington, D.C. held by the Cato Institute.

12 p.m. EDT

Federal Reserve Bank of Atlanta President Jack Guynn introduces Donald Terry of the Inter-American Development Bank at the Federal Reserve Bank of Atlanta's Payments in the Americas conference in Atlanta.

2:30 p.m. EDT

Federal Reserve Board Chairman Alan Greenspan gives opening remarks via satellite at a St. Louis Federal Reserve Bank conference in St. Louis titled "Reflections of Monetary Policy: Twenty-Five years after October 1979."

5:45 p.m. EDT

Federal Reserve Bank of Dallas President Robert D. McTeer discusses the U.S. economy at a dinner hosted by Market News International.

EARNINGS REPORTS

Thursday, Oct. 7

Alcoa, Costco, Marriott, and more.

CHAIN STORE SALES

Thursday, Oct. 7

The International Council of Shopping Centers will release its September same-store sales figures for major U.S. chain retailers. In August, receipts grew by 1.1% from the same period a year ago, after a 3.1% increase in July, and a 1.5% rise in June. While the timing of the Labor Day holiday should be a positive for the September number, the string of hurricanes that have battered the eastern U.S. will be a negative factor.

JOBLESS CLAIMS

Thursday, Oct. 7, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended Oct. 2 probably moved back to 350,000, say economists queried by Action Economics. Jobless claims stepped up to 369,000 in the week ended Sept. 25, the highest level in more than seven months. For the week ended Sept. 18, initial claims were upwardly revised to 351,000, from 336,000 in the week ended Sept. 11.

It appears the four hurricanes in the past six weeks had another big impact on the data. Among the states with the biggest jumps in initial claims were Florida, North Carolina, and Georgia.

The four-week moving average bumped up to 343,500, from 341,300 in the period ended Sept. 18. In the week of Sept. 18, continuing jobless continued to hold near 2.9 million.

CONSUMER INSTALLMENT CREDIT

Thursday, Oct. 7, 3 p.m. EDT

Consumers probably racked up an additional $6 billion of debt in August. That's the consensus forecast of economists queried by Action Economics. Total credit outstanding increased by $10.9 billion in July, the biggest monthly gain since January. In June, consumer debt rose by $4.3 billion after a $4.5 billion gain during May.

July was only the second month in which revolving credit, made up largely of credit cards, increased. Through July, revolving credit has risen by $10 billion.

The rise in debt is coming largely from the non-revolving area, which includes car loans. Non-revolving debt has grown by $43.3 billion so far this year.

MEETING OF NOTE

Friday, Oct. 8

Republican President George W. Bush and Democratic challenger John Kerry meet for the second of three presidential debates. The debate will be held at Washington University in St. Louis.

10 a.m. EDT

Federal Reserve Board Vice Chairman Roger Ferguson takes part in a panel discussion titled, "Safeguarding Good Policy Practice," with former Bank of England member Charles Godhart. The panel discussion is part of the St. Louis Federal Reserve Bank's "Reflections of Monetary Policy: Twenty-Five years after October 1979" conference.

10 a.m. EDT

Federal Reserve Board Governor Ben S. Bernanke takes part in a panel discussion with former Fed Vice Chairman Alan Blinder. The panel discussion is part of the St. Louis Federal Reserve Bank's "Reflections of Monetary Policy: Twenty-Five years after October 1979" conference.

12 p.m. EDT

U.S. Treasury Dept. Undersecretary for International Affairs John Taylor speaks at a Federal Reserve Bank of Atlanta conference in Atlanta.

12:30 p.m. EDT

U.S. Energy Dept. Secretary Spencer Abraham gives a luncheon speech at the Eighth Annual U.S.-Russian Investment Symposium in Washington, D.C.

EARNINGS REPORTS

Friday, Oct. 8

General Electric, and more.

WHOLESALE SALES AND INVENTORIES

Friday, Oct. 8, 10 a.m. EDT

Wholesale sales remained strong, with a forecast increase of 0.7% for August. That's the consensus among economists queried by Action Economics. In July, sales grew 0.5%, after a 0.2% gain in June, and a 0.3% rise in May. Sales came in at an annual pace of 13.8% in July, a slight slowdown from the 14.2% pace in June, and 15.8% in May. The August forecast would keep the yearly growth at its current rate.

Wholesalers were also replenishing inventories. In July, inventories grew by 1.3%, after a 1.1% leap in June, and a 1.4% jump in May. The latest figures pushed the inventory to sales ratio up slightly, to 1.16, from 1.15 in June, and 1.14 in May. With growth seemingly back on track, businesses are likely to continue with plans to build inventories.

EMPLOYMENT REPORT

Friday, Oct. 8, 8:30 a.m. EDT

A pickup in job growth is anticipated once again. The median estimate of economists from Action Economics is a 150,000 increase in employer payrolls. The August report posted a gain of 144,000, with an upwardly revised increase of 73,000 in July. The unemployment rate is expected to remain at 5.4%.

The forecast calls for an increase in factory payrolls by 12,000 jobs, after increasing by 22,000 in August, and 6,000 in July. The latest regional and national factory activity indexes have been more positive. Both the Chicago NAPM survey and the employment index in the national ISM survey showed employment picked up in September.

The average workweek very likely held at 33.8 hours for a second straight month, after dropping to 33.6 hours in June, from 33.8 hours in May. Meanwhile, gains in average hourly earnings are expected to rise by 0.2%, from 0.3% in August. By James Mehring


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