Vital Signs for the Week of Apr. 18


Inflation is a hot topic. This week presents another round of inflation data for investors to digest. Most likely, the new data will do little to quell concerns about rising prices pressures and speculation regarding the Federal Reserve needing to accelerate its tightening of monetary conditions.

On Apr. 15, the Labor Dept.'s import price index showed higher commodity prices outside of oil. Non-petroleum industrial materials, such as metal and wood, rose 1.1% in March. Producer prices are forecast to rise 0.6% in March.

A weaker dollar and strong global demand for raw materials have created price pressures through the production process. To some extent, oil prices provide cover for businesses to pass along their higher costs to consumers. That's why the consumer price index will attract a lot of attention. The headline number will be influenced by higher oil prices. The core measure, which removes food and energy, may be dampened by heavy vehicle discounting. Economists will dig deeper to see if prices are increasing elsewhere.

The Fed now acknowledges that inflation pressures are percolating. In its prior Beige Book report, the central bank noted more reports of pricing power. Nonetheless, the minutes from the Mar. 22 policy meeting showed these underlying pressures have yet to persuade the Fed it should ratchet up interest rates faster than the current quarter-point per meeting pace.

There are two reasons why the Fed can exhibit such patience. First, there are signs the economy may be losing momentum. March retail sales were underwhelming and a preliminary April consumer sentiment index of 88.7, from 92.6, was decidedly weaker than expected. What's more, even though factory output was firm in March, plenty of excess capacity remains in several key sectors, such as computers and electronic products.

Second, plenty of Americans are still looking for a job. Labor shortages exist in some industries. Yet, overall wage growth has yet to show signs of spiraling higher because excess labor capacity persists. Until the economy is close to gobbling up this untapped capacity, a reinforcing cycle of inflation is unlikely to occur.

Here's the weekly economic calendar.

MEETING OF NOTE

Monday, Apr. 18, 10:30 a.m. EDT

European Central Bank President Jean-Claude Trichet speaks at a conference titled "The Euro: One Currency, One Financial Market" in New York City.

4 p.m. EDT

Federal Reserve Board Governor Susan Schmidt Bies gives a speech on the economy and personal finances in Buffalo, New York.

EARNINGS REPORTS

3M, Bank of America, Eli Lilly, Hasbro, Norfolk Southern, Novellus Systems, Parker Hannifin, SunTrust, Texas Instruments, and more.

HOME BUILDERS SURVEY

Monday, Apr. 18, 1 p.m. EDT

The National Association of Home Builders and Wells Fargo bank issue the monthly survey results for April. The report updates housing market conditions by measuring builders' assessments of current sales, buyer traffic through model homes, and expected demand. For March, the activity index stood at 69 for a second straight month, from a reading of 70 in January and 71 in December. The March results still reflected a solid picture for the housing market.

The index tracking single-family home sales remained at 76, after inching to 76 in February, from 77 in January. Expectations for sales in the coming six months remained at 79 for a second consecutive month. The index for prospective buyer traffic inched up to 51, from a reading of 50 in both February and January.

MEETING OF NOTE

Tuesday, Apr. 19, 9 a.m. EDT

U.S. Treasury Secretary John Snow addresses the Mortgage Bankers Association's national policy conference in Washington, D.C.

1:20 p.m. EDT

Federal Reserve Bank of New York President Timothy Geithner gives a speech entitled "Financial Integration and its Implications for International Cooperation" at the conference "The Euro: One Currency, One Financial Market" in New York City.

1:30 p.m. EDT

Federal Reserve Bank of St. Louis President William Poole speaks about entrepreneurship at a national conference on entrepreneurship and small business development sponsored by the St. Louis Fed in Memphis, Tennessee.

6:45 p.m. EDT

Federal Reserve Bank of Cleveland President Sandra Pianalto speaks at the Money Marketeers of New York in New York City.

EARNINGS REPORTS

Tuesday, Apr. 19

American Standard, AmSouth Bancorporation, Bausch & Lomb, Boston Scientific, Dover Corp., Forest Laboratories, Freeport-McMoRan Copper & Gold, General Motors, Illinois Tool Works, IMS Health, Intel Corp., Johnson & Johnson, Johnson Controls, M&T Bank, Mellon Financial, National City, Northern Trust, Pactiv, RadioShack, Safeco, Teradyne, U.S. Bancorp, Viacom, Washington Mutual, Wells Fargo, Yahoo, and more.

ICSC-UBS STORE SALES

Tuesday, Apr. 19, 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. 18. In the week ended Apr. 11, sales managed a 0.3% drop for a second straight week. For the period ended March 26, sales were off by 1%, after a 0.2% increase in the previous in the week ended Mar. 19.

PRODUCER PRICE INDEX

Tuesday, Apr. 19, 8:30 a.m. EDT

Producer prices for finished goods sold by U.S. businesses probably jumped again on higher oil prices in March. The median estimate among economists surveyed by Action Economics is a 0.6% gain. In February, the price index jumped 0.4%, after a 0.3% gain in January, and a 0.3% fall in December. Based on the March consensus forecast, producer prices would be 4.8% higher than a year ago, after nudging up to a yearly pace of 4.7% in February, from 4.3% in January.

Excluding food and energy costs, core prices probably increased by 0.2%. In February, core producer prices edged up 0.1%, after a 0.8% surge in January. Based on the Action Economics survey, core producer prices would be up by 2.9% from the same period a year ago, from 2.8% in February.

Inflationary pressures from crude materials, such as iron and livestock, are not as strong. In February, crude material prices were up 8.1% from a year ago. That's considerably lower than the yearly pace of 25.8% as of November. For the full year of 2004, crude material prices increased 17.6% after a 25.1% rise in 2003.

NEW RESIDENTIAL CONSTRUCTION

Tuesday, Apr. 19, 8:30 a.m. EDT

Housing starts are forecast to have edged a little lower in February. The annual rate for the month is expected to be 2.08 million, say economists queried by Action Economics. In February, housing starts stood at an annual rate of 2.2 million, after a rate of 2.18 million in January. The monthly tally for February was the strongest since early 1984.

Housing starts will likely cool off through the course of the year as interest rates, long-term rates in particular, move higher. The Federal Reserve is expected to keep pushing up the fed funds rate in quarter-point increments. However, concerns over inflation could lead the central bank to tighten at a faster pace. As mortgage rates rise, the housing market should slow. Indeed, the inventory of unsold new homes has gradually crept higher over the past several months. Since slipping to 3.5 months supply of unsold new homes, inventories have moved up to 4.4 months as of February. At the same time, the current inventory level is still very low historically.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, Apr. 19, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales for the second fiscal week of April, ending Apr. 16. During the first fiscal week, sales were off by 3.7% compared with the same period in March. For the full month of March, sales were down 0.7% compared with all of February.

MEETING OF NOTE

Wednesday, Apr. 20, 12 p.m. EDT

International Monetary Fund Managing Director Rodrigo de Rato gives a keynote speech at a meeting of the International Foundation for Liberty in New York City.

12:15 p.m. EDT

Federal Reserve Board Vice Chairman Roger Ferguson speaks about the current account deficit at the Economics Club of the University of North Carolina in Chapel Hill, North Carolina.

12:15 p.m. EDT

U.S. Treasury Secretary John Snow speaks at the Bond Market Association's annual meeting in New York City.

EARNINGS REPORTS

Wednesday, Apr. 20

Allstate, Altria Group, Ambac Financial Group, Bank of New York, Capital One Financial, Caterpillar, Cincinnati Financial, Citrix Systems, Comerica, Cooper Tire & Rubber, Dana, E*Trade Financial, eBay, Ford Motor, General Dynamics, Honeywell, Janus Capital Group, J.P. Morgan Chase, Kinder Morgan, Mercury, Motorola, PMC-Sierra, QUALCOMM, SBC Communications, St. Jude Medical, Torchmark, United Technologies, Wyeth, Yum! Brands, and more.

MORTGAGE APPLICATIONS

Wednesday, Apr. 20, 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. 15. In the week ended Apr. 8, the purchase index rebounded to 474.5, from 446 in the prior period, and 470.9 in the week of Mar. 25. The four-week moving average held virtually unchanged at 459.5 for the week ended Apr. 8, after rising to 456.5 in the week ended Apr. 1.

The average rate on a conventional 30-year mortgage, according to HSH Associates, fell a little more. In the week ended Apr. 8, the rate stood at 6.06%, from 6.17% for the week ended Apr. 1.

The MBA's refi index turned back around. In the period of Apr. 8, the index stood at 1899.6, from 1798.8 in the week ended Apr. 1. The four-week moving average continued to decline, coming in at 1862.5 in the latest period, from 1954.5 in the week ended Apr. 1.

CONSUMER PRICE INDEX

Wednesday, Apr. 20, 8:30 a.m. EDT

Consumer prices for all goods and services probably increased 0.5% in March. That's the consensus among economists surveyed by Action Economics. Surging gasoline and oil prices could present some upside risk to the topline number.

In February, consumer prices climbed 0.4%, after a 0.1% gain in January. The forecasted March gain would put the yearly rate of inflation at 3% for a third straight month.

Excluding the volatile energy and food categories, consumer prices most likely climbed 0.2%. During February, the core consumer price index rose 0.3%, after four straight monthly gains of 0.2%. The seasonally-adjusted yearly rate of core inflation for March would edge down to 2.2%, after running at a rate of 2.4% in February.

REAL EARNINGS

Wednesday, Apr. 20, 8:30 a.m. EDT

Inflation-adjusted weekly earnings of production workers probably slipped 0.2% in March. The Labor Dept.'s employment report showed a 0.3% rise in weekly earnings during the period, while economists expect a 0.4% increase in the March consumer price index. During February, inflation-adjusted earnings were down by 0.4%, after 0.2% gains in both December and January. Compared with the same period a year ago, real earnings in February were off 0.8%, after a 0.6% yearly decline in January.

BEIGE BOOK

Wednesday, Apr. 20, 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 monetary policy meeting scheduled for Tuesday, May 3. Fed watchers will carefully read the Beige Book report for any further signs of inflationary pressures in the economy and for any evidence that higher gasoline and oil prices are dampening economic growth. Right now, the unanimous viewpoint among economists surveyed by Action Economics is that the Fed will lift rates by another 25 basis points on May 3, to 3%.

MEETING OF NOTE

Thursday, Apr. 21, 10 a.m. EDT

Federal Reserve Board Chairman Alan Greenspan testifies on deficits and budget reforms before the Senate Budget Committee in Washington, D.C.

10 a.m. EDT

Federal Reserve Bank of Cleveland President Sandra Pianalto speaks about price stability at a conference held by the Levy Economics Institute of Bard College in Annandale-on-Hudson, New York.

2 p.m. EDT

Federal Reserve Board Governor Edward Gramlich discusses Social Security and Medicare reform in Chester, Pennsylvania.

EARNINGS REPORTS

Allegheny Technologies, ALLTEL, AmeriSourceBergen, Amgen, AT&T, Automatic Data Processing, BellSouth, Bemis Company, Broadcom, Consolidated Edison, Cummins , Danaher, Delta Air Lines, Ecolab, Equifax, Fiserv, Guidant, Hershey Foods, Ingersoll-Rand, Leggett & Platt, Marriott International, MBNA, McDonald's, MedImmune, Merck & Co., Millipore, Noble Corp., Nucor, Office Depot, PNC Financial Services Group, Robert Half International, Rohm and Haas Company, Schering-Plough?Scientific-Atlanta, Sears Holdings Corp, Sherwin-Williams, SunGard Data Systems, Textron, Union Pacific, Weyerhaeuser, Whirlpool, Xilinx, Zions, and more.

JOBLESS CLAIMS

Thursday, Apr. 21, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended Apr. 16 most likely fell to 326,000. Jobless claims eased back to 330,000 for the week ended Apr. 9, after falling to 340,000 in the week ended Apr. 2, from 352,000 in the prior period.

The four-week moving average was virtually unchanged at 338,000 for the week of Apr. 9. During the prior week, the moving average was 337,800. For the week of Apr. 2, continuing jobless claims edged back down to 2.66 million, from a four-year low of 2.69 million in the prior week.

LEADING INDICATORS

Thursday, Apr. 21, 10 a.m. EDT

The Conference Board's composite index of leading economic indicators most likely retreated by 0.3% in March. That's the median estimate from economists surveyed by Action Economics. In February, the index rose 0.1%, following a 0.3% decline in January, and two consecutive 0.3% gains in both December and November. On a yearly basis, the February index was up 0.7% compared with the same period a year ago.

PHILADELPHIA FED SURVEY

Thursday, Apr. 21, 12 p.m. EDT

The Philadelphia Federal Reserve Bank will issue its April survey of business conditions for the mid-Atlantic region. Economists surveyed by Action Economics expect a small rebound to 13, after dropping to 11.4 in March, from 23.9 for February.

The index tracking new orders managed to post a gain in March, rising to 13.2, from 11.7 in February and 9.8 in January. However, unfilled orders declined for a third straight month, albeit at a slower clip. Inventories also fell with a reading of -5.3 in March. The pace of demand remains busy enough for respondents to report an increase in hiring.

The index tracking manufacturers' outlook for the coming six months improved a little. The future business activity index rose to 29.8, from 26.5 for February, and 25.5 in January. The outlook for both new orders and unfilled orders improved in the March survey. Meanwhile, inventories are expected to grow, after a -16.9 reading in February.

MEETING OF NOTE

Friday, Apr. 22, 10 a.m. EDT

Federal Reserve Board Governor Donald Kohn speaks about the imbalances in the U.S. economy at a conference held by the Levy Economics Institute of Bard College in Annandale-on-Hudson, New York.

EARNINGS REPORTS

Friday, Apr. 22

Eastman Kodak, Halliburton, International Paper, MeadWestvaco, Rowan Companies, and more. By James Mehring


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