Vital Signs for the Week of Sept. 19


The Federal Reserve will take center stage given the dearth of other key economic data this week. The Fed's Open Market Committee meets for the first time since Hurricane Katrina. Economists and the bond market alike will be anxiously watching to see if the central bank continues hiking rates or takes a breather.

According to economists queried by Action Economics, the Fed is expected to keep raising rates by another quarter-point. However, the sentiment for the rest of the year has shifted somewhat. A majority of economists see just one more rate increase this year, bringing the Fed funds rate to 4% by year's end.

Once again, though, it will be what the Fed says in its post-meeting press release that garners the most intention. Analysts want to know how, if at all, the central bank's view of the economy has shifted since Katrina. In the previous statement, Alan Greenspan and company said that inflation pressures remained elevated but thought monetary policy was still accommodative to supporting economic activity.

The key to future moves will be how the Fed weighs higher energy prices and the aftermath of Katrina on economic growth and inflation. Greenspan has typically viewed high energy prices as having more impact on growth than prices.

Here's the weekly economic calendar.

EARNINGS REPORTS

Monday, Sept. 19

Apollo Group, Nike, and more.

HOME BUILDERS SURVEY

Monday, Sept. 19, 1 p.m. EDT

The National Association of Home Builders and Wells Fargo bank issue the monthly survey results for September. The report updates housing market conditions by measuring builders' assessments of current sales, buyer traffic through model homes, and expected demand.

In August, the activity index cooled down to a reading of 67, from 70 for July, and 72 in June. The home builders index stood at 70 in May, after an April reading of 67.

The index tracking single-family home sales eased to 72, from an upwardly revised level of 76 for July, and 77 in June. Expectations for sales in the coming six months held at 77 for a second straight month. The index for prospective buyer traffic fell to 50, from 55 in both July and June. Despite the dip in the overall index, the absolute level is still relatively strong.

MEETING OF NOTE

Tuesday, Sept. 20

The Federal Reserve's Federal Open Market Committee meets to discuss monetary policy. An announcement by the Fed will come at 2:15 p.m. ET. A majority of economists polled by Action Economics expects another 25 basis point hike in the federal funds rate, to 3.75%. After a spike in sentiment immediately following the hurricane that the Fed might pause in September, the predominant belief is that the central bank will once again raise rates.

There is also a shift in expectations for the rest of the year. A majority of economists say the central bank will put on the brakes in December. The consensus is for the Fed funds rate to end the year at 4%.

EARNINGS REPORTS

Tuesday, Sept. 20

Circuit City Stores, Goldman Sachs, and more.

ICSC-UBS STORE SALES

Tuesday, Sept. 20, 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 period ending Sept. 17. During the week ended Sept. 10, sales were down 0.2%, after holding steady in the week ended Sept. 3, and dropping 0.3% in the previous two weeks.

NEW RESIDENTIAL CONSTRUCTION

Tuesday, Sept. 20, 8:30 a.m. EDT

The pace of housing starts probably slowed a little in August. The annual rate for the month is expected to be 2.03 million, according to economists queried by Action Economics. July housing starts edged back to an annual pace of 2.04 million, from 2.05 million in June. May starts stood at an annual rate of 2.04 million, from 2.03 million in April.

In the wake of Hurricane Katrina, homebuilders will eventually see some increased demand as rebuilding commences in the hard hit areas of Louisiana, Mississippi, and Alabama.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, Sept. 20, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales through three fiscal weeks of September, ended Sept. 17. Through the first two weeks of September, ended Sept. 10, sales were up 0.5%. For the entire month of August, sales were off 1% compared with the full month of July.

MEETING OF NOTE

Wednesday, Sept. 21, 9 a.m. EDT

International Monetary Fund releases its World Economic Outlook with global economic forecasts in Washington, D.C.

EARNINGS REPORTS

Wednesday, Sept. 21

Bed Bath & Beyond, Biomet, FedEx, and more.

MORTGAGE APPLICATIONS

Wednesday, Sept. 21, 7 a.m. EDT

The Mortgage Bankers Association releases its numbers on mortgage applications for both home buying and refinancing for the week ending Sept. 16. The purchase index moved up to 513.4, from 499.1 for the week of Sept. 2, and 470.6 in the previous period. The four-week moving average moved up to 492.9, from 489.4 for the week ended Sept. 2.

The average rate on a conventional 30-year fixed mortgage, according to HSH Associates, eased to 5.87% during the week ended Sept. 9. For the week ended Sept. 2 the mortgage rate stood at 5.9%.

The MBA's refi index fell to 2198.7 in the period ended Sept. 9. The index stood at 2357.1 during the previous period, after slipping to 2187.8 in the week ended Aug. 26. The four-week moving average edged down to 2264.4, from 2286.1 in the week ended Sept. 9.

MEETING OF NOTE

Thursday, Sept. 22, 1 p.m. EDT

Chinese Ambassador to the U.S. Zhou Wenzhong will speak about the future of U.S.-China relations to the Asia Society in New York City.

EARNINGS REPORTS

Thursday, Sept. 22

General Mills, KB Home, Oracle, and more.

JOBLESS CLAIMS

Thursday, Sept. 22, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended Sept. 17 probably jumped to 450,000 due to the hurricane. Jobless claims soared to 398,000 for the week ended Sept. 10, after rising to 327,000 in the previous period. Displaced workers following Hurricane Katrina were finally able start filing for jobless benefits. The states reporting the biggest spikes in initial claims were Louisiana, Texas, and Alabama.

The four-week moving average jumped to 340,750, from 321,000 for the period ended Sept. 3. Continuing jobless claims for the week ended Sept. 3 climbed to 2.59 million, from 2.57 million in the week ended Aug. 27.

LEADING INDICATORS

Thursday, Sept. 22, 10 a.m. EDT

The Conference Board's composite index of leading economic indicators is expected to have slipped 0.2% in August. That's the median forecast among economists surveyed by Action Economics. The July leading index edged up 0.1%, after a 1.2% gain in June. The July leading index was up 2.4% compared with the same period a year ago, and was up 2.7% from a year ago in June.

The June index contained some changes to the leading index, as well as revisions to historical data which made recent data more positive. A major change is how the spread between the 10-year Treasury bond and the Fed funds rate effects the leading indicators index. The yield curve will have a negative impact on the index only if it inverts. In other words, if the Fed funds rate is higher than the 10-year Treasury rate. A smaller positive gap between the long-term and short-term rate just means a smaller positive contribution. By James Mehring


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