Markets & Finance

Vital Signs: A Narrower Trade Gap?


On tap for the coming week: September international trade figures, October import and export price data, and consumer sentiment

Economists will be able to take a breather. The upcoming week looks relatively light compared to the past ten days and will have a decidedly international flavor.

The September figures on international trade will be important for several reasons. The markets will want to see how much the trade gap narrows after recording a record deficit in August. A narrowing is expected to come from a reduction in imports and an increase in exports. Lower oil prices should dominate any change in imports, while capital goods and other manufactured goods are a key part of the export side. Recent factory activity surveys have been weaker than anticipated. But economic growth abroad continues to be strong, providing a reason to expect demand for manufactured goods to hold up well even if demand at home is softening.

The import price index will also gain some attention because of oil. After the index dipped in September, economists expect another sizeable decline in import prices as a result of lower energy prices. This should presage further easing in the energy category within the October consumer and producer price indexes. The drop in energy prices will help to reduce inflation pressures and restore some purchasing power to consumers.

At home, the University of Michigan's preliminary November consumer sentiment report will get attention, following an unexpected slip in the Conference Board's consumer confidence index for October.

Here's the weekly economic calendar, from Action Economics.

Economic Reports

Report

Date

Time

For

Median Estimate

Last Period

Consumer Credit (Billion)

Tuesday, Nov. 7

3 p.m.

September

$5.5

$5.0

Trade Balance (Billion)

Thursday, Nov. 9

8:30 a.m.

September

-$65.7

-$69.9

Export Price Index

Thursday, Nov. 9

8:30 a.m.

October

0.0%

-0.5%

Import Price Index

Thursday, Nov. 9

8:30 a.m.

October

-1.1%

-2.1%

University of Michigan Consumer Sentiment (preliminary)

Thursday, Nov. 9

10 a.m.

November

93.7

93.6

Wholesale Trade Sales

Thursday, Nov. 9

10 a.m.

September

0.2%

1.1%

MEETINGS OF NOTE

Monday, Nov. 6, 8 a.m. EST

Federal Reserve Bank of Chicago President Michael Moskow speaks about the economic outlook at the Annual Economic Forecast during a Business Leaders Breakfast held by the Chicagoland Chamber of Commerce and WBBM Newsradio 780 in Chicago.

6:30 p.m. EST

Federal Reserve Bank of Cleveland President Sandra Pianalto speaks about monetary policy and the economic outlook to the Pittsburgh Business Times CFO of the Year Awards event in Pittsburgh.

7:10 p.m. EST

Federal Reserve Bank of San Francisco President Janet Yellen gives a speech entitled "The Changing Landscape of Economic Inequality" at the University of California, Irvine.

ICSC-UBS STORE SALES

Tuesday, Nov. 7, 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. 4. Sales eased 0.2% in the week ended Oct. 28, after dropping 1.1% in the prior week, and a 0.6% gain in the week ended Oct. 14. Sales for the week were up 2.3% from a year ago.

JOHNSON REDBOOK INDEX

Tuesday, Nov. 7, 8:55 a.m. EST

This weekly measure of retail activity will report on sales for the first fiscal week of November, ended Nov. 4. For the full month of October, sales were up 1.3% from September. Sales during September were unchanged from August.

CONSUMER INSTALLMENT CREDIT

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

Consumers are expected to have accumulated $5 billion in additional debt during September. In August, consumer credit grew by $5 billion, following gains of $8.4 billion in July, $11.5 billion in June, and $15.7 billion in May.

A majority of the June and May increases were in revolving credit, which is dominated by credit cards. The summer rise in revolving debt was likely boosted by higher gasoline prices. At the same time, weaker auto sales have helped to limit monthly gains in non-revolving credit. Through August, the increase in non-revolving debt was just $33.7 billion, the smallest rise since 1997.

MEETINGS OF NOTE

Wednesday, Nov. 8, 7 a.m. EST

Federal Reserve Bank of Chicago President Michael Moskow speaks about the economic outlook to the Indiana Chamber of Commerce's board of directors meeting in Indianapolis.

12:10 p.m. EST

Federal Reserve Bank of Chicago President Michael Moskow discusses the economy at the Ball State Business Forecasting Roundtable Outlook Meeting in Muncie, Ind.

MORTGAGE APPLICATIONS

Wednesday, Nov. 8, 7 a.m. EST

The Mortgage Bankers Association releases its numbers on mortgage application volume for both home buying and refinancing for the week ending Nov. 3. The purchase index stumbled, with the index coming in at 375.6, from 382.4 for the week ended Oct. 20 in the prior period. The refi index fell to 1709.2, from 1790.4 for the week ended Oct. 20.

The average 30-year fixed-rate mortgage dropped sharply, to 6.24% for the period ended Oct. 27, from 6.36% in the prior period.

The four-week moving average for the purchase index cooled off to 381.5, from 388.8. At the same time, the four-week average for the refi index fell for the first time in fourteen weeks, to 1787.7, from 1844.1 for the week ended Oct. 20.

MEETINGS OF NOTE

Thursday, Nov. 9

U.S. President George W. Bush hosts Mexican president-elect Felipe Calderon at the White House in Washington, D.C.

9 a.m. EST

Former Federal Reserve Board Chairman Alan Greenspan gives a keynote speech at the AMR Research Executive Leadership Conference 2006 in Boston.

JOBLESS CLAIMS

Thursday, Nov. 9, 8:30 a.m. EST

Jobless claims jumped to a three month high of 327,000 in the week ended Oct. 28. For the week ended Oct. 21, claims were revised up slightly to 309,000.

The four-week moving average climbed to 311,250, from 305,500 in the week ended Oct. 21. Continuing jobless claims for the week ended Oct. 21 eased to 2.42 million, from 2.44 million in the prior week.

INTERNATIONAL TRADE

Thursday, Nov. 9, 8:30 a.m. EST

The monthly U.S. trade deficit of goods and services is forecast to have narrowed to $65.7 billion in September. The August trade gap exceeded expectations, hitting a record level of $69.9 billion.

Imports are forecast to fall back a bit. Lower oil prices should translate into a lower nominal amount of crude oil imports. After peaking around $77 per barrel in July, crude oil prices had fallen nearly 24% by the end of October.

Exports are expected to have risen slightly. A key area for exports is capital goods. The latest factory data indicate a deceleration in activity.

However, strong economic performances abroad are expected to help support manufacturing activity, particularly in capital goods. In August, capital goods exports rebounded with a 3.8% rise, after a 3.8% fall in July. Through the first eight months of 2006, capital goods exports are up 14.2% vs. the same period in 2005. The Institute for Supply Management's October factory activity report showed acceleration in orders from abroad.

IMPORT AND EXPORT PRICES

Thursday, Nov. 9, 8:30 a.m. EST

Import prices in October probably fell further on lower energy prices. During September, import prices dropped 2.1% as imported petroleum prices plunged 10.3%. Excluding fuels, import prices were up 0.3% in September.

Compared to the same period a year ago, overall import prices were up 2% in September, a considerably smaller gain from recent months. In August, import prices posted a yearly gain of 6.3%.

Export prices are forecast to have held steady in October. In September, export prices slipped 0.5%, after growing 0.4% in each of the prior two months. The monthly decline in September was led by a 0.7% fall in the prices of agricultural goods.

Compared to the same month a year ago, September export prices cooled off to a pace of 3.7%, from 5.2% in August. Capital goods prices were up 0.7% from a year ago for a second straight month, following a period of falling prices from late 2005 on into the first quarter of 2006. Consumer goods prices slowed to a pace of 2.1%, from 2.3% on a yearly basis in August.

WHOLESALE SALES AND INVENTORIES

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

Wholesale sales probably grew at a slower pace in September. Overall, sales rose 1.1% in August after growing 0.5% in July following three straight monthly gains of over 1%. The August rise was concentrated in electrical, autos, and machinery goods. Petroleum sales were off 1.6%, likely due in part to lower prices. In August, sales grew 12.5% from a year ago.

Wholesale inventories increased by 1.1% in August despite a 6.5% drop in petroleum inventories and a 0.9% decline among autos. The level of inventories rose 0.9% in the prior month. On a yearly basis, inventories were up 9.7% in August, after a 9% gain in July.

CONSUMER SENTIMENT INDEX

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

The University of Michigan's Survey Research Center will report its initial reading of consumer sentiment for November. Consumer sentiment is expected to hold pretty steady. The final October index was 93.6, up from a final September reading of 85.4. Lower gasoline prices have contributed to the recent upswing in consumer optimism, but the University of Michigan also credited consumers' improved outlook on the economy and the labor market.

MEETINGS OF NOTE

Friday, Nov. 10, 8:45 a.m. EST

Federal Reserve Board Chairman Ben Bernanke takes part in a panel discussion on money and monetary policy at the European Central Bank's 4th ECB Central Banking Conference in Frankfurt, Germany.

Earnings Calendar

Day

Companies

Monday

Anadarko Petroleum, El Paso, Fluor

Tuesday

Citizens Communications, Dean Foods, Emerson Electric, International Game Technology, RR Donnelley, Sara Lee, Watson Pharmaceuticals

Wednesday

Barr Pharmaceuticals, BMC Software, Cisco Systems, Dynegy, Federated Department Stores, Hospira, Interpublic Group of Companies, PG&E, Priceline.com

Thursday

American International Group, JC Penney, Kohl's, Nvidia, TXU, Viacom, Walt Disney, Windstream Communications


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