Vital Signs for the Week of Nov. 7


Although Hurricane Katrina is long gone, she continues to cloud the economic picture. This week brings a limited amount of economic numbers, but the most important figures will all be colored by this year's batch of hurricanes.

The first look at consumer sentiment in November may prove to be the most important data of the week. Consumer confidence numbers remain suppressed by the bad weather and its effect on energy prices. Consumers remain less optimistic about inflation and income. Upbeat chain-store sales for October show little reason to believe that weak confidence numbers should have a major impact on actual consumer spending. Plus, gasoline and natural gas prices have moderated significantly.

However, the underlying cause of the recent downturn in sentiment -- an erosion in purchasing power -- may persist if companies are finding some pricing power. That could lead consumers to pull back on major purchases such as cars and homes.

Since consumers continued to spend in September, the trade deficit for the month is expected to top $60 billion. High oil and natural gas prices, higher levels of imported energy goods, and possible export disruptions from closed ports are all likely to have contributed to a larger trade deficit. Even so, unless the September gap is larger than the wider deficit assumed by the Commerce Dept. in estimating real gross domestic product, the next look at real gross domestic product (GDP) could even show a smaller drag from trade than first reported.

The federal government is also likely to report a budget deficit for October and some of that will be hurricane related. The timing of when government funds earmarked directly for rebuilding the Gulf Coast region will appear in the official Treasury Dept. figures is not clear. But it's certain that Hurricane Katrina's damage will mean higher budget figures for months to come unless Congress offsets the additional expenses with spending cuts elsewhere.

Here's the weekly economic calendar.

The bond market will be closed on Friday, Nov. 11 in observance of the Veterans Day holiday.

MEETING OF NOTE

Monday, Nov. 7, 8:30 a.m. EST

Federal Reserve Board Governor Mark Olson gives a speech entitled "Fair Lending Through the Lens of the New Home Mortgage Disclosure Act Data" at the Consumer Bankers Association's conference in Washington, D.C.

CONSUMER INSTALLMENT CREDIT

Monday, Nov. 7, 3 p.m. EST

Consumer credit if forecast to have increased by $5.5 billion during September. That's the consensus among economists queried by Action Economics. Households added $4.9 billion in new debt during August, after a $6.5 billion rise in July, and $15 billion in June.

Americans have been cautious about racking up credit card debt. Revolving credit, made up mostly of credit card debt, has increased by $10.5 billion, or 1.3%, so far this year. Non-revolving credit, made up primarily of auto loans, has grown $35.8 billion, or 2.7%, during the course of this year. Softer vehicle sales will likely mean smaller increases in non-revolving debt for the remainder of the year.

EARNINGS REPORTS

Tuesday, Nov. 8

Caremark Rx, Cooper Tire & Rubber, Dynegy, Fisher Scientific International, McKesson Corp., Transocean, Visteon, and more.

ICSC-UBS STORE SALES

Tuesday, Nov. 8, 7:45 a.m. EST

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 Nov. 5. During the week ended Oct. 29, retail sales increased 0.4%, after easing 0.2% in the previous week, and improving 0.4% in the week ended Oct. 15.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, Nov. 8, 8:55 a.m. EST

This weekly measure of retail activity will report on sales for the first fiscal week of November, ended Nov. 5. October store sales were up 1.3% from September. For the entire month of September, sales rose 0.4%.

MEETINGS OF NOTE

Wednesday, Nov. 9, 11 a.m. EST

Federal Reserve Bank of Philadelphia President Anthony Santomero gives a speech entitled "China in an Interdependent Global Economy" at a conference on China in Philadelphia.

12 p.m. EST

Federal Reserve Bank of Cleveland President Sandra Pianalto speaks about innovation and the regional economy to the Strongsville Chamber of Commerce in Strongsville, Ohio.

4:30 p.m. EST

Federal Reserve Bank of St. Louis President William Poole speaks about the current account deficit at Lindenwood University in St. Charles, Mo.

EARNINGS REPORTS

Wednesday, Nov. 9

Cisco Systems, JDS Uniphase, King Pharmaceuticals, NVIDIA, and more.

MORTGAGE APPLICATIONS

Wednesday, Nov. 9, 7 a.m. EST

The Mortgage Bankers Assn. releases its numbers on mortgage applications for both home buying and refinancing for the week ending Nov. 4. The purchase index retreated some more, coming in at 437.6 for the week ended Oct. 28, from 466.4 in the week ended Oct. 21. The latest reading was the lowest since February. The four-week moving average cooled to 469.4, from 478.4 for the week ended Oct. 21.

The average rate on a conventional 30-year fixed mortgage, according to HSH Associates, rose to 6.17% in the week ended Oct. 14 after rising to 6.13% during the week ended Oct. 7.

The MBA's refi index fell further as well. In the week ended Oct. 28, the index was 1862.8, after falling to 1916.8 during the previous week, from 2095.7 in the week ended Oct. 14. The four-week moving average declined for a sixth consecutive period. In the week ended Oct. 21, the average was 1970.1, after easing to 2031.2 in the prior week.

WHOLESALE SALES AND INVENTORIES

Wednesday, Nov. 9, 10 a.m. EST

Wholesale sales are forecast to have improved. The consensus among economists polled by Action Economics is for a monthly gain of 0.4% in September. Sales in August grew 1.3%, after a 0.5% gain during July. Autos and petroleum led the charge. Auto sales on the wholesale level jumped 5% in August, after a 2.8% gain for July. Petroleum sales rose 5.1%, after an 8.6% spike in July. Excluding autos and petroleum, sales were up just 0.4% in August.

Wholesale inventory growth accelerated with a 0.5% increase during August, after a 0.1% gain in July and a 0.4% rise in June. Besides a 5.6% increase in petroleum inventories -- most likely driven up by higher prices for crude oil -- machinery inventories posted a 1.8% increase. Compared with the same period a year ago, machinery stockpiles are up 15.6%. That's the biggest yearly increase among durable goods.

MEETING OF NOTE

Thursday, Nov. 10, 9:30 a.m. EST

Federal Reserve Board Governor Susan Schmidt Bies testifies before the Senate Banking Committee on the development of the new Basel capital accords in Washington, D.C.

EARNINGS REPORTS

Thursday, Nov. 10

Dell, Hospira, International Game Technology, Kohl's, Rockwell Collins, Target, Progressive, and more.

JOBLESS CLAIMS

Thursday, Nov. 10, 8:30 a.m. EST

First-time claims for jobless benefits for the week ended Nov. 5 is forecast to be 330,000, according to Action Economics. Jobless claims edged down to 323,000, from 331,000 for the week ended Oct. 22, and 357,000 in the prior period.

The four-week moving average also cooled down, falling to 350,500, from 367,500 in the week ended Oct. 22, and 376,800 during the week ended Oct. 15. Continuing jobless claims for the week ended Oct. 22 stood at 2.82 million, from 2.87 million in the week ended Oct. 15.

INTERNATIONAL TRADE

Thursday, Nov. 10, 8:30 a.m. EST

The monthly U.S. trade deficit of goods and services probably widened in September. The consensus among economists queried by Action Economics is for a $61 billion deficit. The August trade gap stood at $59 billion, and the July trade gap was $58 billion.

The level and price of energy imports probably helped nudge the trade gap higher in September. Natural gas prices reached $14.5 per million Btu during September. Crude oil prices moderated during the month.

Meanwhile, economists expect a small easing in exports after hitting a record level in August. Exports have been helped a lot by large shipments of civilian aircraft. In August, civilian aircraft exports climbed $667.6 million, after a $165.3 million increase in July.

IMPORT AND EXPORT PRICES

Thursday, Nov. 10, 8:30 a.m. EST

Import prices slipped during October. The median forecast from Action Economics calls for a 0.2% decline. Import prices climbed 2.3% in September, after three straight monthly gains of 1.2%. Excluding petroleum, import prices still posted a 1.2% rise in September due in large part to a 28.8% jump in imported natural gas prices.

Stripping out all fuels and lubricants, September import prices were up a more modest 0.4%. Overall, import prices were up 9.9% from a year ago in September, from 7.9% in August. Excluding oil, import prices were up 3%, vs. a yearly clip of 1.9% in August.

October export prices most likely rose 0.2%. In September, prices jumped 0.9%, after a 0.1% dip in August, and a 0.1% gain in July. A gradually strengthening dollar during the course of the year is affecting export prices.

FEDERAL BUDGET

Thursday, Nov. 10, 8:30 a.m. EST

The federal government is forecast to have kicked off the new fiscal year with a budget deficit of $55 billion in October. That's the consensus estimate among economists polled by Action Economics. Fiscal year 2005 closed with a $35.7 billion surplus in September. The total budget deficit for the year was $318.6 billion after a $412.8 billion gap for fiscal year 2004. The October data should include emergency assistance spending as well as some rebuilding outlays for hurricane victims.

CONSUMER SENTIMENT INDEX

Thursday, Nov. 10, 9:45 a.m. EST

The University of Michigan's Survey Research Center will report its preliminary reading of consumer sentiment for November. Economists surveyed by Action Economics are forecasting a small improvement to 75.8.

The final October index continued the downward trend, falling to 74.2, from 76.9 in September, and the recent high of 96.5 back in July. The index tracking expectations for the coming six months held firm at 63.2, from 63.3 in September. However, higher energy prices helped erode the current conditions index to 91.2 in October, from 98.1. The University of Michigan also reported that consumer sentiment on buying a home was the weakest since 1990. By James Mehring


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