Vital Signs for the Week of Apr. 11


Even the economy likes sequels. Upcoming economic data are likely to show the economy fared well in March. That means first-quarter growth probably hit an annualized pace of 4% once again. If so, it would mark the sixth time in the past eight quarters that real gross domestic product expanded at an annualized clip of 4% or more.

According to economists queried by Action Economics, key components of the economy showed healthy gains in March. Retail sales data are expected to have held up well in March, boosted by the early Easter holiday. Industrial output is also forecast to have increased at a decent clip as businesses continue to make investments in new equipment. Business inventories also look set to contribute positively with a forecast 0.6% gain for February.

However, a look below the headline numbers may reveal early signs of another second-quarter slowdown. In a reprise of 2004, oil is emerging as a prime villain to strong growth. But unlike last year, inflation may also play a supporting role.

Business activity reports from the Institute for Supply Management reported prices paid by a solid majority of manufacturers and service-sector businesses climbed in March. Capacity utilization is also rising. Manufacturers still have some spare capacity but that reserve is steadily declining. Ramped-up business output and a limited amount of capacity expansion by factories could translate into inflationary pressures from bottlenecks.

When it comes to consumer spending, the gasoline station component in the retail sales report bears watching. A pickup in gas station sales means more household income is going to fill up vehicles. Households do not immediately change spending plans when gas prices surge, but in time, other retailers will be negatively affected. And according to an Apr. 7 Energy Dept. report, higher gasoline prices are here to stay through 2006.

The international trade figures are also important. Higher trade deficits are a drag on real GDP since the country is either buying more imports or seeing less demand from abroad. Besides larger bills for imported petroleum in the coming months, demand from other countries may ease as oil affects foreign economies.

Here is the weekly economic calendar.

MEETING OF NOTE

Monday, Apr. 11, 5 p.m. EDT

Federal Reserve Bank of Atlanta President Jack Guynn speaks about ethics and financial markets at Bridgewater College in Bridgewater, Virginia.

EARNINGS REPORTS

Abbott Laboratories, Gannett, and more.

MEETING OF NOTE

Tuesday, Apr. 12, 7:30 p.m. EDT

Federal Reserve Bank of Philadelphia President Anthony Santomero gives a speech entitled "A Policymaker's Reflections on the Recent Business Cycle" at the University of Delaware in Newark, Delaware.

ICSC-UBS STORE SALES

Tuesday, Apr. 12, 7:45 a.m. EDT

This weekly tracking of retail sales, compiled by the International Council of Shopping Centers and UBS bank, will update buying activity for the week ending Apr. 11. In the week ended Apr. 4, sales managed a 0.3% gain despite serious storms in the eastern part of the country and rising gasoline prices. For the week ending Mar. 26, sales were off by 1%, after a 0.2% increase in the previous period, and a 0.6% gain in the week ended Mar. 12.

INTERNATIONAL TRADE

Tuesday, Apr. 12, 8:30 a.m. EDT

The February monthly trade deficit is expected to widen. The U.S. trade deficit for goods and services is forecast to be $59 billion, after registering a $58.3 billion shortfall in January and a December deficit of $55.7 billion.

Oil prices are unlikely to have a big impact on the February trade figures. However, come March and April, the trade gap could swell as crude oil prices soared well north of $50 per barrel. The Commerce Dept. report measures the value, not the volume, of goods and services. Thus, even if the same amount of oil is imported, the trade deficit would increase as prices climb.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, Apr. 12, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales for the first fiscal week of April, ending Apr. 9. For the full month of March, sales were down 0.7% compared with all of February. For the entire month of February, retailers reported a 2% increase in sales vs. January.

FOMC MINUTES

Tuesday, Apr. 12, 2 p.m. EDT

The Federal Reserve will release the minutes of the Open Market Committee meeting held on Mar. 22. As of this year, the Fed is now releasing the minutes three weeks after its monetary policy meeting. Prior to the change, minutes were released with a six to eight week lag. The Fed acknowledged in its post-meeting press release that some inflationary pressures are emerging. Fed watchers will pour through the minutes for any signs that the central bank may soon alter its methodical pace of tightening.

FEDERAL BUDGET

Tuesday, Apr. 12, 2 p.m. EDT

The federal government probably racked up another sizeable deficit over the course of March. Economists surveyed by Action Economics expect the Treasury Dept.'s report to show a $70 billion deficit. The Treasury Dept. reported a record monthly shortfall of $113.9 billion for February, after an $8.6 billion surplus in January. So far, the current fiscal year budget gap is a little less than last year. Through the first five months of fiscal 2005, the deficit stands at $223.4 billion, vs. $228.5 billion through February of 2004.

The large budget deficit is due to higher spending. Comparing individual and corporate income taxes, along with other forms of revenues collected by the government, receipts are up by over $72 billion so far this fiscal year vs. the same period last year. Total outlays through February are up by $67.3 billion compared with the first five months of fiscal 2004.

EARNINGS REPORTS

Wednesday, Apr. 13

Advanced Micro Devices, Apple Computer, BB&T Corp., Harley-Davidson, and more.

MORTGAGE APPLICATIONS

Wednesday, Apr. 13, 7 a.m. EDT

The Mortgage Bankers Association releases its tally of mortgage applications for both home buying and refinancing for the week ending Apr. 8. In the week ended Apr. 1, the purchase index slipped back to 446, after jumping to 470.9 in the prior week, from 446.4 in the week of Mar. 18. The four-week moving average held virtually unchanged at 456.5 for the week ended Apr. 1, after rising to 458 in the week ended Mar. 25.

The average rate on a conventional 30-year mortgage, according to HSH Associates, edged up a little more. In the week ended Apr. 1, the rate stood at 6.17%, from 6.14% for the week ended Mar. 25.

The MBA's refi index fell for a third consecutive week. During the period of Apr. 1, the index stood at 1798.8, after easing to 1857.2 in the week ended Mar. 25, from 1894.4 in the week ended Mar. 18. The four-week moving average declined to 1959.5, from 2049 in the week ended Mar. 25.

RETAIL SALES

Wednesday, Apr. 13, 8:30 a.m. EDT

Retail sales probably bounced back in March. The consensus among economists surveyed by Action Economics is for a 0.7% rise for the month. The early Easter holiday and an uptick in vehicle sales probably helped the March results. At the same time, higher gasoline prices likely had some negative impact. In February, sales grew 0.5%, after 0.3% gain in the prior month, and 1.3% jump in December.

Excluding autos, economists expect a 0.5% gain in March retail sales. In February, ex-auto sales climbed by 0.4%, after a 1% January increase. After slumping in January, vehicle sales have improved. In March, the pace of U.S. light vehicle sales was 16.8 million. Sales came in at an annual pace of 16.3 million in February and 16.2 million during January.

MEETING OF NOTE

Thursday, Apr. 14, 7:30 p.m. EDT

Federal Reserve Board Governor Ben S. Bernanke speaks about the U.S. current account deficit at the Federal Reserve Bank of St. Louis in St. Louis.

EARNINGS REPORTS

Thursday, Apr. 14

Dow Jones & Company, Eaton, Fifth Third Bancorp, First Data, Franklin Electric, PepsiCo, Southwest Airlines, Sun Microsystems, New York Times Company, Unisys, UnitedHealth Group, and more.

JOBLESS CLAIMS

Thursday, Apr. 14, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended Apr. 9 most likely eased to 330,000. Jobless claims eased back to 334,000 for the week ended Apr. 2, after rising to an upwardly revised 353,000 in the week ended Mar. 26. The surprising jump in late March was pinned on the early Easter holiday.

The four-week moving average was virtually unchanged at 336,500 for the week of Apr. 2. During the prior week, the moving average was 336,800. For the week of Mar. 26, continuing jobless claims popped back up to 2.69 million, from a four-year low of 2.6 million in the prior period.

BUSINESS INVENTORIES

Thursday, Apr. 14, 8:30 a.m. EDT

Inventories held by manufacturers, wholesalers, and retailers probably expanded 0.6% in February, say economists queried by Action Economics. Factory inventories were already reported to have grown by 0.9% in February while wholesale inventories expanded 0.6%. Overall, business inventories climbed 0.9% in January, after a 0.2% gain during December and a 1.1% jump in November

Despite the healthy gains in inventory levels, inventory-to-sales ratios remain quite low. The January ratio held at 1.3 for the second consecutive month. Therefore, inventories are likely to keep increasing as businesses try to maintain the inventory levels necessary to reliably meet demand.

MEETING OF NOTE

Friday, Apr. 15, 11:15 a.m. EDT

Bank of Canada Governor David Dodge gives a speech entitled "Canadian Economy and the Conduct of Monetary Policy" before the Canadian Association at the New York Yacht Club in New York City.

EARNINGS REPORTS

Citigroup, General Electric, KeyCorp, Mattel, Regions Financial, Tribune, Wachovia, and more.

IMPORT AND EXPORT PRICES

Friday, Apr. 15, 8:30 a.m. EDT

Import prices probably posted another big increase in March. Economists queried by Action Economics forecast a 1.2% jump in import prices for the month. February import prices rose 0.8%, after a January gain of 0.7%.

Petroleum prices are playing a big role in the recent runup of import prices. Excluding petroleum, import prices posted a smaller 0.2% increase for February, following a 0.3% gain in January. During those two-months, petroleum product prices surged by 3.9% and 3.4%, respectively.

Compared with the same month a year ago, overall import prices picked up to a yearly rate of 6.1% in February, from 5.8% in January. Excluding energy, the yearly gain was 2.9%, from 3.1% in January.

March export prices very likely rose by 0.3%. In February, export prices held steady, following a 0.9% rise in January, and a 0.1% increase in December. Compared with a year ago, export prices were up 3.4% in February, vs. a 4.1% yearly pace in the prior period.

Export prices for agricultural commodities continue to slide, off 8.2% from a year ago for February. The yearly price increase for capital goods was 0.8% in February, after a 1.1% increase in January. Price gains for consumer goods exports held at a yearly clip of 1.6%, after edging up to 1.3% in December.

EMPIRE STATE MANUFACTURING SURVEY

Friday, Apr. 15, 8:30 a.m. EDT

The New York Federal Reserve Bank will release its latest survey of business conditions for manufacturers in the New York Fed district. According to the median forecast of economists surveyed by Action Economics, the April headline manufacturing activity index probably held fairly steady at 19. The March reading picked up to 19.6, from 19.2 in February, but remained below the 20.1 reading posted for January and 27.1 in December.

Although the March headline reading improved, other key indexes were weaker. The shipments index fell to 21.3 in March after rebounding to 33.3 in February from 26.2 in January. The new orders index indicated a slowdown with a March level of 7.9 from 17.3 in February. The unfilled orders index improved but remained in negative territory. The March level stood at -10.89, after plunging to -12.2 in February. The sub-zero reading indicates that respondents are now reducing their backlogged orders.

After five straight monthly declines, the expectations index improved. The index tracking the outlook for the coming six months by the region's manufacturers rose to 44.1, from 40.

INDUSTRIAL PRODUCTION

Friday, Apr. 15, 9:15 a.m. EDT

U.S. industrial production is expected to have grown by 0.3% in March. That's the consensus forecast of economists surveyed by Action Economics. A decline in factory hours worked in the Labor Dept.'s employment report signals some downside risk to the March forecast. In February, industrial output rose 0.3%, following a 0.1% gain in January, and a 0.8% rise in December. In the past two months, total output has been restrained by sizeable declines in the utilities sector. Factory output alone has grown by 0.5% in each of the past three months.

The February figures from the Fed continue to show that Corporate America is still spending. Production of computers climbed 1.8%, following a 2.2% jump in January. Overall, production of business equipment grew 0.3% on the heels of a 1% gain in the previous month, and a 1.2% surge in December.

The average operating rate for all industries probably increased to 79.5%, from 79.4% in February, and 79.2% in both January and December. Among manufacturing, capacity utilization is steadily rising. In February, the rate stood at 78.5%, from 75.9% in February of 2004. The long-run average for manufacturing is 79.8%.

CONSUMER SENTIMENT INDEX

Friday, Apr. 15, 9:45 a.m. EDT

The University of Michigan's Survey Research Center will report its preliminary reading of consumer sentiment for April. The consensus among economists surveyed by Action Economics is for the index to remain virtually unchanged at 92. April consumer confidence surveys will be watched for any indications of whether or not energy prices are dampening consumers' spirits. In March, the index finished at 92.6, from 94.1 in February, and 95.5 in January.

In March, the current conditions index edged down to 108, from 109.2 in the previous month and 110.9 in January. The January level was the highest since November of 2000. The future expectations index also fell. The March reading declined to 82.8, the third straight monthly fall. By James Mehring


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