Markets & Finance

Vital Signs: Going Abroad for Growth


On tap: February trade figures, March producer and import prices, April consumer sentiment, and more

One of the bright spots for the U.S. economy has been the vigor shown by the rest of the global economy. So far, there appears to be little spillover of the U.S. slowdown to the rest of the world. And according to an Apr. 4 International Monetary Fund report, "most countries should be in a position to 'decouple' from the U.S. economy and sustain strong growth if the U.S. slowdown remains as moderate as expected."

That's good news for U.S. exports and companies that do business abroad. This week's February trade data should show demand for U.S. goods and services in the rest of the world remains strong, with economists forecasting another gain in exports. The overall trade deficit probably widened some, but that's due to higher oil prices which will raise the dollar total of energy imports. Capital goods are an especially important category to watch, with domestic business investment spending showing more weakness.

Another tailwind for exporters is the weaker dollar, now running at a 2-year low against the euro. Consumer and capital goods exporters appear to be taking advantage of the softer dollar and exercising some pricing power by raising prices in dollar terms.

However, a softer greenback and higher oil prices will likely cause another jump in overall import prices. And higher energy prices are also expected to push up March producer prices. Businesses are facing some price pressures, particularly from resurgent energy costs, as demonstrated by the jumps in the prices paid indexes from the Institute for Supply Management's national business activity reports for March.

And energy prices are also weighing on consumers' minds. The first look at consumer sentiment in April is expected to show no change in mood, but the continued rise in gasoline prices could put some pressure on the forecast.

Ultimately this week’s data will show more of the same: U.S. businesses benefiting from a strong global economy but continued challenges at home.

Here's this week's lineup, from Action Economics.

Economic Reports

Report

Date

Time

For

Median Estimate

Last Period

Treasury Budget (Billion)

Wednesday, Apr. 11

2 p.m.

March

-$95.0

-$120.0

Export Price Index

Thursday, Apr. 12

8:30 a.m.

March

0.3%

0.7%

Import Price Index

Thursday, Apr. 12

8:30 a.m.

March

0.5%

0.2%

PPI

Friday, Apr. 13

8:30 a.m.

March

0.6%

1.3%

PPI (Ex-food & energy)

Friday, Apr. 13

8:30 a.m.

March

0.2%

0.4%

International Trade Balance (Billion)

Friday, Apr. 13

8:30 a.m.

February

-$60.0

-$59.1

University of Michigan Consumer Sentiment Index (Preliminary)

Friday, Apr. 13

10:30 a.m.

April

88.4

88.4

MEETING OF NOTE

Monday, Apr. 9, 11 a.m. EDT - International Monetary Fund Managing Director Rodrigo de Rato delivers a luncheon speech on the global economy at the Peterson Institute for International Economics in Washington, D.C.

MEETINGS OF NOTE

Tuesday, April 10, 9 a.m. EDT - The International Monetary Fund releases its Global Financial Stability Report in Washington, D.C.

9:30 a.m. EDT - Federal Reserve Board Governor Frederic Mishkin speaks at Bridgewater College in Bridgewater, Virginia.

7:30 p.m. EDT - Federal Reserve Bank of Philadelphia President Charles Plosser delivers the 2007 Hutchinson Lecture entitled "Credibility and Commitment" at the University of Delaware in Newark, Del.

ICSC-UBS STORE SALES - Tuesday, Apr. 10, 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 ended Apr. 7. The latest figures showed a 0.3% rise, after increasing 0.2% in the week ended Mar. 24. The yearly pace of growth picked up to 4.9% for the week ended Mar. 31, from 4.6% in the prior period. Some of the strength in sales is being attributed to an earlier Easter holiday.

JOHNSON REDBOOK INDEX - Tuesday, Apr. 10, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales for the fifth and final fiscal week of March, ended Apr. 7. Through the first four fiscal weeks ended Mar. 31, sales were up 0.9% compared to the same period in February. For the complete month of February sales were off 1.1% from January.

MEETINGS OF NOTE

Wednesday, Apr. 11, 9 a.m. EDT - The International Monetary Fund issues its semi-annual World Economic Outlook global forecasts in Washington, D.C.

12 p.m. EDT - Federal Reserve Bank of Richmond President Jeffrey Lacker speaks at an economics luncheon in Charlotte, N.C.

8:30 p.m. EDT - Federal Reserve Bank of Chicago President Michael Moskow gives a public affairs presentation about the economic outlook at the Kenilworth Union Church in Kenilworth, Ill.

MORTGAGE APPLICATIONS - Wednesday, Apr. 11, 7 a.m. EDT

The Mortgage Bankers Association issues its weekly mortgage application volume data for home buying and refinancing activity during the week ending Apr. 6. For the week ended Mar. 30, the purchase index slowed to 402.9. The purchase index was 411.1, from 410.6 in the week ended Mar. 16. The refi index fell to 2098.3, from 2197.7 for the week ended Mar. 23 and 2208.6 in the week ended Mar. 16.

The four-week moving average for the purchase index fell for the first time in five weeks, to 409.7. In the week ended Mar. 23, the moving average was 410.3. The four-week average for the refi index fell to 2204.2 in the week ended Mar. 30, from 2238.2.

The average 30-year fixed-rate mortgage jumped to 6.13% from 6.04% in the week ended Mar. 23.

FOMC MINUTES - Wednesday, Apr. 11, 2 p.m. EDT

The Federal Reserve will release the minutes of the two-day Open Market Committee meeting held on Mar. 20-21. Investors and economists will scour the release to get a better reading on how the central bank views current economic conditions, especially after the Mar. 21 post-meeting press release.

The statement gave the central bank more flexibility for future policymaking by swapping the phrase "additional firming" with "future policy adjustments." The Fed is no longer explicitly stating that the next move will be a rate hike. Some viewed this as a first step toward an interest rate cut if weaker economic data persist. Others put less emphasis on the change in the above phrasing and pointed to the Fed's emphasis that the "predominant policy concern remains the risk that inflation will fail to moderate as expected."

FEDERAL BUDGET - Wednesday, Apr. 11, 2 p.m. EDT

The federal government is expected to post a larger March deficit than a year ago. In March of 2006, the deficit was $85.3 billion and $71.7 billion in March of 2005. Through February, the budget gap of $162.2 billion for fiscal year 2007 is running below last year's total of $217.7 billion.

Through the first five months of fiscal year 2007, personal income receipts are up 12.8%, and corporate receipts are 20.7% higher compared to the same period in the prior fiscal year. The pace of growth in fiscal year 2006 through February was nearly 30%. The growth rate of corporate tax receipts should continue to cool off on signs that corporate profits grow at a slower clip.

JOBLESS CLAIMS - Thursday, Apr. 12, 8:30 a.m. EDT

Jobless claims for the week ended Mar. 31 turned higher to 321,000. In the prior week, claims were revised up to 310,000, from 308,000. The four-week moving average slowed to 315,750, from 317,250 in the week ended Mar. 24. Continuing jobless claims for the week ended Mar. 24 fell to 2.49 million, from 2.52 million in the week ended Mar. 17.

IMPORT AND EXPORT PRICES - Thursday, Apr. 12, 8:30 a.m. EDT

The rise in import prices probably accelerated in March. Prices climbed 0.2% in February on the back of a 2% rise in petroleum costs. Outside of petroleum, import prices slipped 0.1% for a second straight month in February.

However, import prices for consumer goods and motor vehicles are gradually rising at a faster pace. Prices for imported vehicles are up 0.9% from a year ago, the quickest pace in about 18 months. Consumer goods prices are rising as well, up 1.4% from a year ago in February, after falling in the early part of 2006. The falling dollar is playing a role in the upward price pressures for these goods.

Export prices most likely increased some more. In February, prices rose 0.7%, after a 0.4% gain in January. On a yearly basis, prices were up 4.7% in February. Higher prices for food are driving the overall index, with agricultural commodity prices up 16.9% from a year ago. However, other businesses may be benefiting from a softer greenback by lifting prices on a dollar basis. Consumer goods prices are up 2.4% from a year ago in February, while prices of capital goods are creeping higher after falling in late 2005 and early 2006.

MEETINGS OF NOTE

Friday, Apr. 13 - The Group of Seven Finance Ministers and central bank heads meet in Washington, D.C.

PRODUCER PRICE INDEX - Friday, Apr. 13, 8:30 a.m. EDT

The producer price index is expected to have risen at a strong 0.6% in March. That's the median forecast among economists queried by Action Economics. Resurgent energy and food prices will likely put some upward pressure on the March headline index, after driving the February index up 1.3%.

Energy prices rose 3.5% in February, while food prices went up 1.9%. The yearly pace of wholesale prices bounced back up to 2.5% in February, from 0.2% in January. The February reading was the strongest since last August. The higher prices may be affecting businesses, as the latest national business activity reports showed a deceleration in activity and a big rebound in the indexes tracking prices paid by businesses for goods.

INTERNATIONAL TRADE - Friday, Apr. 13, 8:30 a.m. EDT

The U.S. trade deficit of goods and services probably widened a little in February. The increase in imports looks set to outpace any rise in exports as higher energy prices are expected to increase the total dollar value of energy imports. The deficit in January narrowed to $59.1 billion, from $61.5 billion in December.

Beyond the headline numbers, export results for capital and consumer goods are important. So far, solid economic growth outside the U.S. has translated into strong demand for U.S. products. That's been especially good news for manufacturers in the wake of a housing recession and reduced capital investment by U.S. businesses. Exports for capital goods were up 12.1% from a year ago in January, while consumer goods were up 15.4%.

CONSUMER SENTIMENT INDEX - Friday, Apr. 13, 10 a.m. EDT

The advanced Reuters/University of Michigan consumer sentiment index for April probably held steady. The final March index fell to 88.4, from 91.3 in February, and 96.9 in January. The final January result was the strongest since December of 2004.

In March, consumer sentiment regarding current conditions and future expectations registered further declines. Households are feeling less certain about their financial situation, especially those making less than $50,000. However, consumers remain hopeful that prospects will improve in the coming year, with the expected personal finances index rebounding to 126 in March, from 122 in February. A large part of the deterioration in consumer sentiment, especially among lower and middle-class households, is due to higher gasoline prices.

Earnings Calendar

Day

Companies

Tuesday

Alcoa

Wednesday

Bed Bath & Beyond, Genentech, Research In Motion

Thursday

Commerce Bankshares, Lam Research, MGIC Investment, Rite Aid

Friday

General Electric


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