Vital Signs for the Week of Dec. 5


Corporate America is finding its holiday spirit. Sure, companies probably let out a big sigh of relief as consumers swarmed the malls on Black Friday and flocked to the Internet on Cyber Monday. But businesses are also becoming less miserly, pulling out their wish lists, and spending more money on equipment and additional workers.

The November employment report showed 215,000 new jobs were created during the month. The October and September numbers were revised up by a total of 38,000 jobs. What's more, even manufacturers are hiring, adding 11,000 workers in November, after a gain of 15,000 in October, the first back-to-back monthly gains in a year and a half.

The next batch of economic data is expected to reaffirm the cheerier economic mood. The October factory orders numbers should show a broad rebound even after accounting for a big boost in aircraft orders. The Institute for Supply Management's November non-manufacturing business activity report will likely tick lower but remain at a strong level. The ISM's November factory activity report, already released, did just that. The recent figures show that companies are dipping into their sack-loads of unspent profits to expand capacity and improve productivity.

In addition, businesses may be in the process of restocking bare warehouse shelves. In the past two quarters, companies have drawn down their inventories despite strong economic growth. The trend may reflect increased corporate uncertainly as well as possible production and transportation disruptions from this year's round of hurricanes. The October wholesale and factory inventory figures may show some early signs of a push to replenish inventories now that the economic picture is looking brighter and less uncertain.

All in all, consumers and businesses could make it a merry fourth quarter for the economy.

Here's the weekly economic calendar.

ISM NON-MANUFACTURING SURVEY

Monday, Dec. 5, 10 a.m. EST

The Institute for Supply Management issues its November index of business activity in the mostly services, non-manufacturing sector. The median forecast of economists polled by Action Economics is for a reading of 59.3%. The October index bounced back to 60%, after sinking to 53.3% in September due to Hurricanes Katrina and Rita. Respondents feared material shortages resulting from rebuilding efforts in the hard hit Gulf Coast area, as well as port disruptions. Delivery times of materials and inputs to respondents lengthened in October. However, demand appears to be bouncing back nicely.

The new orders index picked up to 58.2%, from 56.6% in September but remained well below the August level of 65.8%. The backlog of unfilled orders also grew as the October index climbed to 55%, from 52% in September.

EARNINGS REPORTS

Tuesday, Dec. 6

AutoZone, Comverse Technology, Sears Holdings, Kroger, and more.

ICSC-UBS STORE SALES

Tuesday, Dec. 6, 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 Dec. 3. Retail sales were off 0.7% for the week ended Nov. 26, with a 1% gain for the prior period, and a 0.6% dip during the week ended Nov. 12. The weekly store sales numbers will take on added importance as analysts attempt to asses the strength of this year's holiday sales.

PRODUCTIVITY AND COSTS

Tuesday, Dec. 6, 8:30 a.m. EST

The second pass at nonfarm productivity growth for the third quarter, measured as output per hour worked, will most likely show an upward revision. The median forecast of economists queried by Action Economics is an annualized growth rate of 4.4%. The initial pace was 4.1%. In the second-quarter, productivity improved by an upwardly revised annual rate of 2.1%, following a first quarter pace of 3.2%.

Quarterly unit labor costs probably eased at an annual rate of 0.9%, from a previously reported 0.5% decline. Second-quarter nonfarm unit labor costs were revised down to an increase of 1.8%, after a 2.2% gain in the previous quarter.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, Dec. 6, 8:55 a.m. EST

This weekly measure of retail activity will report on sales for the first fiscal week of December, ended Dec. 3. In November, sales ended up 0.3% better than the month of October. For the entire month of October, store sales were up 1.3% from September.

MANUFACTURERS' SHIPMENTS, INVENTORIES, AND ORDERS

Tuesday, Dec. 6, 10 a.m. EST

Factory orders very likely rebounded with a 2.3% increase in October. That's the consensus estimate from Action Economics. In September, new orders dropped 1.7%, after a 2.9% increase during August. The recent swings in orders have been primarily driven by civilian aircraft orders, which fell 41.8% in September, after a 5.3% gain in August, and 21.4% fall in July. A September machinist strike at Boeing influenced the monthly figures. October durable goods figures showed a big rebound in October.

The overall result of October durable goods orders showed a 3.4% gain, after a 2% drop. Capital goods orders less civilian aircraft orders were up 1.3%. Excluding defense equipment and the volatile aircraft sector gives a truer picture of business sentiment.

EARNINGS REPORTS

Wednesday, Dec. 7

Pall, and more.

MORTGAGE APPLICATIONS

Wednesday, Dec. 7, 7 a.m. EST

The Mortgage Bankers Association releases its numbers on mortgage applications for both home buying and refinancing for the week ending Dec. 2. The purchase index was 476.2 in the week ended Nov. 25, after easing to 472.3 in the week ended Nov. 18, from 477.9 in the prior week. The four-week moving average bounced up 473.0, from 463.4 during the week ended Nov. 18.

The average rate on a conventional 30-year fixed mortgage, according to HSH Associates, kept on climbing. For the week ended Nov. 25, the rate eased back to 6.41%, from 6.46% in the week ended Nov. 18.

The MBA's refi index is sliding lower due to higher mortgage rates. During the week ended Nov. 25, the refi index dropped to 1484.3, from 1584.1 in the prior week, and 1702.4 over the week ended Nov. 11. The current level is the lowest since mid-2004. The four-week moving average continued to tumble, to 1642.4, from 1737 for the week ended Nov. 18.

CONSUMER INSTALLMENT CREDIT

Wednesday, Dec. 7, 3 p.m. EST

Consumer credit is expected to have grown $5.5 billion in October. That's the median forecast among economists polled by Action Economics. Households trimmed about $60 million of debt in September, the first monthly decline since November of 2004.

Consumers have been more cautious about racking up debt this year. Through September, consumer credit has increased by $53.8 billion this year. That's the smallest increase through the first three quarters of a year since 1993. Most of the increase in installment credit has been in the non-revolving area, made up mostly of auto loans, up $39.7 billion so far this year. Americans are not racking up big balances on their credit cards. Revolving credit has increased by $14.1 billion.

EARNINGS REPORTS

Thursday, Dec. 8

Costco Wholesale, National Semiconductor, and more.

JOBLESS CLAIMS

Thursday, Dec. 8, 8:30 a.m. EST

First-time claims for jobless benefits for the week ended Dec. 3 are forecast to hold at a rate of 320,000. That's the consensus among economists surveyed by Action Economics. Jobless claims eased to 320,000, from an upwardly revised 337,000 in the previous period and 305,000 for the week of Nov. 12.

The four-week moving average also edged down to 322,500, from 323,750 for the week ended Nov. 19, but remained just above the 322,000 for the four week period through the week ended Nov. 12. Continuing jobless claims for the week ended Nov. 19 was 2.77 million, from an upwardly adjusted 2.79 million in the week ended Nov. 12.

CONSUMER SENTIMENT INDEX

Friday, Dec. 9, 9:45 a.m. EST

The University of Michigan's Survey Research Center will report its preliminary reading of consumer sentiment for December. Economists surveyed by Action Economics are forecasting a small increase, to 83.8, from the final November reading of 81.6. The November level was up from 74.2 in October and 76.9 in September. However, the index remains below the pre-hurricane levels of 89.1 in August and 96.5 for July.

The Conference Board's November consumer confidence surged to 98.9, from 85.2 in October. The University of Michigan's survey places more emphasis on financial market conditions, while the Conference Board places greater emphasis on the state of the labor market.

The index tracking expectations for the coming six months improved to 69.6, from 63.2 in October. The Conference Board's November expectations index leaped to 88.8, from 70.1 in October. Despite the improvements, Richard Curtin, director of the University of Michigan's Surveys of Consumers, stated in the latest survey statement that a slower housing market and uncertainty regarding volatile energy prices will likely leave consumers more hesitant to spend.

WHOLESALE SALES AND INVENTORIES

Friday, Dec. 9, 10 a.m. EST

Wholesale sales are forecast to have held steady during October, according to economists polled by Action Economics. Sales accelerated with a 2.4% rise in September, from a 1.8% increase in August, and 0.5% in July. The September results pushed sales up 10.5% from a year ago, the fastest pace since January. The September increase was boosted by a 7.5% rise in petroleum sales. Take out sales of petroleum and total sales rose by 1.8% in September. The effect from petroleum on total sales will be less positive as oil prices have fallen back below $60 per barrel.

Wholesale inventories grew 0.6%, after a 0.5% gain in August. A 3.8% jump in computer equipment inventories and a 2.6% increase in inventories of drugs drove the overall increase. Petroleum inventories rose 3.8% in September as well.

The pickup in sales pulled the inventory-to-sales ratio down to 1.15, the lowest level since May of 2004. In August the ratio was 1.17 and 1.18 in July. Wholesale sales growth has outpaced increases in inventories in the prior four months with the margin widening each period. This gap may have been driven in part by bottlenecks and transportation disruptions from this year's hurricanes. By James Mehring


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