Market Focus: The spike in oil puts the emphasis on the timeliest data possible. A slowing in the Chicago PMI could hint at oil-related headwinds. Watch out for the Employment Report
Monday:
Personal Income and Outlays: Personal income is the dollar value of income received from all sources by individuals. Personal outlays include consumer purchases of durable and nondurable goods, and services. Personal Spending is expected to increase .4%. Consumer Spending is expected to rise .4%. And the Core PCE Price index is expected to increase .2%. Why Investors Care: The income and outlays data are another handy way to gauge the strength of the consumer sector in this economy and where it is headed. Income gives households the power to spend and/or save. Spending greases the wheels of the economy and keeps it growing. The consumption (outlays) part of this report is even more directly tied to the economy, which we know usually dictates how the markets perform. Income is the major determinant of spending — U.S. consumers spend roughly 95 cents of each new dollar. Consumer spending accounts directly for more than two-thirds of overall economic activity and indirectly influences capital spending, inventory investment and imports.
Chicago PMI: The Institute of Supply Management – Chicago compiles a survey and a composite diffusion index of business conditions in the Chicago area. Manufacturing and non-manufacturing firms are both surveyed. Hence, it is not directly comparable to pure manufacturing surveys. Readings above 50 percent indicate an expanding business sector. Consensus is a small decline to 68. Why Investors Care: Investors should track economic data like the Chicago PMI to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that won’t generate inflationary pressures. Markets focus on the overall index – the Business Barometer which many refer to as the Chicago PMI. The breakeven point for the index is 50. Readings above 50 indicate positive growth while numbers below 50 indicate contraction. The farther the reading is from 50, the more rapid the pace of growth or decline.
Speakers Include: Boston Federal Reserve President and New Your Federal Reserve President.
Tuesday:
Motor Vehicle Sales: Unit sales of domestically produced cars and light duty trucks (including sport utility vehicles and mini-vans). Individual manufacturers report usually report sales on the first business day of the month. Motor vehicle sales are good indicators of trends in consumer spending. The consensus is looking at a slight decline. Why Investors Care: Since motor vehicle sales are an important element of consumer spending, market players watch this closely to get a handle on the direction of the economy. The pattern of consumption spending is one of the foremost influences on stock and bond markets.
ICSC Goldman Store Sales: This weekly measure of comparable store sales at major retail chains, published by the International Council of Shopping Centers, is related to the general merchandise portion of retail sales. It accounts for roughly 10 percent of total retail sales. Why Investors Care: The ICSC-Goldman index is one of the more timely indicators of consumer spending, since it is reported every week. The pattern in consumer spending is often the foremost influence on stock and bond markets. Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you’ll have a pretty good handle on where the economy is headed.
Redbook: A weekly measure of sales at chain stores, discounters, and department stores. It is a less consistent indicator of retail sales than the weekly ICSC index. It is also calculated differently than other indicators. For instance, figures for the first week of the month are compared with the average for the entire previous month. Why Investors Care: Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you’ll have a pretty good handle on where the economy is headed.
ISM Mfg Index: The Institute for Supply Management surveys more than 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A composite diffusion index of national manufacturing conditions is constructed, where readings above (below) 50 percent indicate an expanding (contracting) factory sector. The consensus is looking for a slight decline. Why Investors Care: The ISM manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. More than one of the ISM sub-indexes provides insight on commodity prices and clues regarding the potential for developing inflation. The Federal Reserve keeps a close watch on this report that helps it to determine the direction of interest rates when inflation signals are flashing in these data.
Construction Spending: The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars. Consensus estimates are pointing to a .8% decline. Why Investors Care: Construction spending has a direct bearing on stocks, bonds and commodities because it is a part of the economy that is affected by interest rates, business cash flow and even federal fiscal policy. On a technical note, construction outlays for private residential, private nonresidential, and government are key inputs into three components of GDP–residential investment, nonresidential structures investment, and the structures portion of government expenditures.
Speakers Include Ben Bernanke.
Wednesday:
Challenger Job Cut Report: This monthly report counts and categorizes announcements of corporate layoffs based on mass layoff data from state departments of labor. The job-cut report must be analyzed with caution. It doesn’t distinguish between layoffs scheduled for the short-term or the long term, or whether job cuts are handled through attrition or actual layoffs. Why Investors Care: The job-cut report is basically a rehash of the weekly jobless claims report but provides additional insight into where layoffs are occurring. There is industry and geographic (states) detail that is not available with the weekly jobless claims.
ADP Employment Report: The ADP national employment report is computed from a subset of ADP records that in the last six months of 2008, represented approximately 400,000 U.S. business clients and approximately 24 million U.S. employees working in all private industrial sectors. The data are collected for pay periods that can be interpolated to include the week of the 12th of each month, and processed with statistical methodologies similar to those used by the U.S. Bureau of Labor Statistics to compute employment from its monthly survey of establishments. Why Investors Care: ADP national employment report can help improve the payroll forecast by providing information in advance of the employment report. The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy.
Beige Book: Got its name from the color of the book’s cover. This book is produced roughly two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Fed district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts. Why Investors Care: If the Beige Book portrays an overheating economy or inflationary pressures, the Fed may be more inclined to raise interest rates in order to moderate the economic pace. Conversely, if the Beige Book portrays economic difficulties or recessionary conditions, the Fed may see the need to lower interest rates in order to stimulate activity.
Speakers include Atlanta Federal Reserve Bank President and Ben Bernanke.
Thursday:
Chain store Sales: Monthly sales volumes from individual department, chain, discount, and apparel stores are usually reported on the first Thursday of each month. Chain store sales correspond with roughly 10 percent of retail sales. Chain store sales are an indicator of retail sales and consumer spending trends. Why Investors Care: Just a few words of caution. Sales are reported as a change from the same month, a year ago. It is important to know how strong sales actually were a year ago to make sense of this year’s sales. In addition, sales are usually reported for “comparable stores” in case of company mergers. Chain store sales not only give you a sense of the big picture, but also the trends among individual retailers and different store categories. Perhaps the discount chains such as Target and Wal-Mart are doing well, but the high-end department stores such as Tiffany’s are lagging. Maybe apparel specialty retailers are showing exceptional growth.
Monster Employment Index: The Index presents a snapshot of employer online recruitment activity nationwide. Why Investors Care: In addition to providing insight on the general strength of the economy, this report gives a sense of how many jobs employers are trying to fill. If that number is relatively high, it could mean there is a shortage of available workers and companies may have to offer higher wages to attract them. This leads to wage inflation, which is bad news for the stock and bond markets. Federal Reserve officials are always worried about the potential for inflationary pressures.
Jobless Claims: New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smoothes out weekly volatility. The consensus estimate is for a slight rise. Why Investors Care: By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation threatens, it’s a good bet that interest rates will rise, bond and stock prices will fall.
Productivity and Costs: Productivity measures the growth of labor efficiency in producing the economy’s goods and services. Unit labor costs reflect the labor costs of producing each unit of output. Both are followed as indicators of future inflationary trends. The consensus is for a 2.6% rise in Productivity but a drop of .3% in Unit Labor Costs. Why Investors Care: Productivity growth is critical because it allows for higher wages and faster economic growth without inflationary consequences. In periods of robust economic growth, productivity ensures that inflation will remain well behaved despite tight labor markets. Productivity growth is also a key factor in helping to increase the overall wealth of an economy since real wage gains can be made when workers are more productive per hour.
Friday:
Employment Situation: The employment situation is a set of labor market indicators based on two separate surveys in this one report. Based on the Household Survey, the unemployment rate measures the number of unemployed as a percentage of the labor force. Other key series come from the Establishment Survey (of business establishments). Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation’s business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls. The Consensus is for a rise from last month to 180,000 new non-farm payroll. An increase from 9% to 9.1% in the “unemployment rate” and a slight decrease in hourly earnings. Why Investors Care: The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they’re getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors.
Factory Orders: Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month. Consensus estimates are calling for a big increase from .2% to 2%. Why Investors Care: By tracking economic data like factory orders, investors will know what the economic backdrop is for these markets and their portfolios. The orders data show how busy factories will be in coming months as manufacturers work to fill those orders. This report provides insight to the demand for not only hard goods such as refrigerators and cars, but nondurables such as cigarettes and apparel. In addition to new orders, analysts monitor unfilled orders, an indicator of the backlog in production.
