Chinese data released last week confirmed the soft patch the economies across the globe are experiencing in the wake of the fragile recovery post the credit crisis of 2008-09. Eurozone credit crisis and the U.S. fiscal cliff have now accentuated fears of a global double-dip recession, given the economic influence wielded by the currency bloc and the U.S. Strangely enough, the equity markets have been resilient to the economic crisis, thanks to stimulus and policy hopes.
Speculation is now rife that Spain will now request for financial assistance within the next several weeks following the footsteps of Ireland, Portugal, Greece and Cypress. BNP Paribas believes that a MoU will be signed, allowing the EFSF and later the ESM to buy sovereign Spanish debt from both the primary and secondary markets. The firm also sees the possibility of ECB intervention to push yields down further and unclog the monetary policy transmission channels.
Last week, the Commerce Department reported that the U.S. trade deficit narrowed to $42.9 billion in June, as exports rose 0.9 percent to a record high of $185 billion, while imports were down 1.5 percent. The real trade deficit also narrowed and therefore net trade is likely to give support to the overall growth in the second quarter.
A separate report released by the Commerce Department showed that wholesale inventories fell 0.2 percent month-over-month in June, while inventories were up 5.3 percent year-over-year. Wholesale sales fell 1.4 percent month-over-month but were up 3.1 percent from last year. Accordingly, the inventories to sales ratio was at 1.20 compared to 1.17 in the year-ago period.
A Federal Reserve statistical release showed that outstanding consumer credit rose by $6.5 billion or 3 percent on a seasonally adjusted annual basis in June. Revolving credit tied to credit cards slipped by $3.7 billion, while non-revolving credit associated with auto loans rose by $10.2 billion.
Economic clamor intensifies in the unfolding week, as several first-tier economic data are due to be released in the week. The Commerce Department's retail sales report for July, the results of the New York and Philadelphia Federal Reserves' manufacturing survey for August and the Federal Reserve's industrial production report for July are among the key reports that could shed further clarity on the economic outlook.
Traders may also focus on the National Association of Home Builders' housing market index for August, the Commerce Department's housing starts report for July, the weekly jobless claims report and the preliminary consumer sentiment index compiled by Reuters and the University of Michigan. The Labor Department's producer and consumer price inflation reports for July, the Conference Board's leading economic indicators index for June and the business inventories report for June round up the economic events of the week.
Retail sales may have seen a rebound following three consecutive months of declines, as U.S. equities rallied and gasoline prices thawed. Chain store sales have posted a modest gain in the month, while auto sales were soft.
Industrial production growth may have remained healthy, given the gains in the number of hours worked in the manufacturing sector in the past two months. Economists also expect a strong performance by utilities and the auto sector, boosted by shorter summer shut downs.
Homebuilder confidence is expected to have remained flat near its 5-year high, give the decline in new mortgage applications and the recent setback witnessed by the job market.
There are no important economic reports due on Monday.
The U.S. Labor Department is scheduled to release its report on the producer price index for July at 8:30 am ET. The index measures the average change over time in the prices received by domestic producers of goods and services. Economists expect the headline index and the core producer price index for July to have risen by 0.2 percent each.
Producer price index edged up by 0.1 percent in June after tumbling by 1.0 percent in May. The modest increase surprised economists, who had expected prices to see further downside and fall by about 0.4 percent.
Excluding a continued drop in energy prices and an increase in food prices, the core producer index rose by 0.2 percent in June. The increase matched the core price growth seen in each of the three previous months and came in line with economist estimates.
Retail sales of food and retail companies with one or more establishments that sell merchandise and associated services to final consumers are slated to be released at 8:30 am ET. For July, economists estimate a 0.3 percent increase in retail sales and a 0.4 percent increase in retail sales that exclude autos.
U.S. retail sales fell 0.5 percent month-over-month in June, marking the third straight month of declines. April's decline was downwardly revised to 0.5 percent. The declines witnessed in June were broad based. Excluding autos, sales were down 0.4percent and sales, excluding autos, gasoline and building materials, used in the GDP calculation edged down 0.1 percent.
The Commerce Department is scheduled to release its business inventories report for June at 10 am ET. The report summarizes the results from the monthly retail trade, wholesale trade and factory goods orders surveys. The report is expected to show a 0.2 percent increase in business inventories for the month.
Business inventories rose 0.3 percent month-over-month increase in business inventories for May. Annually, inventories were up 5.2 percent. At the same time, business sales edged down 0.1 percent month-over-month, but rose 5.1 percent annually. The inventories to sales ratio came in at 1.27, flat with the year-ago period.
The consumer price index for July is scheduled to be released at 8:30 am ET. The index is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Economists expect the headline index as the core consumer price index to have risen by 0.2 percent each.
The consumer price index came in unchanged in June following a 0.3 percent drop in May. The flat reading on consumer prices came in line with economist estimates. Excluding food and energy prices, the core consumer price index rose by 0.2 percent in June. The modest increase matched the core price growth seen in the three previous months and came in line with expectations.
The results of the New York Federal Reserve's empire state manufacturing survey, which elicits response from 200 manufacturing executives in New York state, is slated to be released at 8:30 am ET. The headline general business conditions index for August is expected to come in at 7.
The general business conditions index improved 5 points to 7.4. Meanwhile, the new orders index slipped 5 points to -2.7, retreating into negative territory for the first time since November. However, the shipments index improved 5 points to 10.3.
The employment indexes were mixed, with the employment index rising 6 points to 18.5, while the average workweek index slipping 3 points to zero. The futures general business conditions index declined 3 points to 20.2.
The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for June at 9 am ET.
The Federal Reserve's industrial production report is due out at 9:15 am ET. Economists estimate a 0.5 percent increase in the industrial production performance for July, while manufacturing output is estimated to have increased by 0.5 percent. Capacity utilization may have declined by 0.7 percentage points to 79.2 percent.
The industrial production report for June showed a 0.4 percent month-over-month increase in output following a 0.2 percent decline in May. Manufacturing output climbed 0.7 percent, with motor vehicle and parts production rising 1.9 percent and business equipment output improving by 1.6 percent. Mining output rose 0.7 percent, while utilities output declined by 1.9 percent.
The National Association of Home Builders is scheduled to release the results of its August survey on homebuilders' confidence at 10 am ET. The consensus estimates call for the index to remain unchanged at 35.
Homebuilder sentiment improved to 35 in July from 29 in June, according to the results of a survey by the National Association of Home Builders. The reading represented the best level since March 2007. The present conditions index rose 6 points and the sales expectations index jumped 11 points, while the index measuring prospective buyer traffic was up 6 points.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended August 10th at 10:30 AM ET.
Crude oil stockpiles fell by 3.7 million barrels to 369.9 million barrels in the week ended August 3rd. Nevertheless, inventories were above the upper limit of the average range.
Gasoline inventories fell by 1.8 million barrels and were in the lower half of the average range. Distillate stockpiles edged down by 1.8 million barrels, remaining below the lower limit of the average range. Refinery capacity utilization averaged 92.4 percent over the four weeks ended August 3rd compared to 92.5 percent over the previous four weeks.
Minneapolis Federal Reserve Bank President Naryana Kocherlakota is due to speak in Minot, North Dakota at 8 pm ET.
A report on housing starts, which refer to the number of privately-owned new homes on which construction has been started over some period, and building permits, which are the number of permits issued for new housing units each month, is slated to be released at 8:30 am ET. Economists estimate housing starts for July to come in at 750,000, while building permits are expected to have increased to 766,000.
In June, housing starts rose to a seasonally adjusted annual rate of 760,000 from 711,000 in May, reaching the highest level since October 2008. Single-family and multi-family starts rose from the month-ago levels. Meanwhile, building permits, considered an indicator of future starts, fell to 755,000 from 784,000.
The Labor Department is due to release its customary jobless claims report for the week ended August 11th at 8:30 AM ET. Economists expect claims to edge up to 365,000 from 361,000 in the previous week.
U.S. initial jobless claims fell by 6,000 to 361,000 in the week ended August 4th. The four-week average was up 1,000 to 367,000, while continuing claims, calculated with a lag of a week, rose to 3.33 million in the week ended July 28th compared to 3.28 million in the previous week.
The results of the Philadelphia Federal Reserve's manufacturing survey are due out at 10 am ET. Economists expect the diffusion index of current activity to show a reading of -5 for August.
Manufacturing activity contracted at a faster than anticipated pace in July, although improving from month-ago levels. The diffusion index of manufacturing activity rose 3.7 points to -12.9. The new orders index improved to -6.9 from -18.8, the unfilled orders index increased to -9.5 from -16.3 and the shipments index rose to -8.6 from -16.6. However, the4 number of employees index fell to -8.4 from 1.8.
Kocherlakota will speak in Williston, North Dakota, repeating his speech the previous day, at 8 pm ET.
The preliminary report of the Reuters/University of Michigan's consumer sentiment survey for August is scheduled to be released at 9.55 am ET. The consumer sentiment index is expected to have edged down to 72 from 72.3 in the previous month.
The Conference Board is scheduled to release a report on the U.S. leading economic indicators index for July at 10 am ET. The consensus estimate calls for a 0.2 percent increase in the index.
The leading economic indicators index for the U.S. fell 0.3 percent month-over-month in June following a 0.4 percent increase in May and a 0.1 percent decline in April. At the same time, the coincident economic index and the lagging economic indicators index climbed 0.2 percent each.
by RTT Staff Writer
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