8:30 am Advance Retail Sales (Bureau of the Census)
Despite all the holiday discounting, total retail sales were probably flat to slightly declining in December. Non-auto sales probably dipped a little (less than 0.5 percent). And now that holiday discounts are history, retail buying is likely to be falling in the dead of winter.
8:30 am Producer Price Indexes (Bureau of Labor Statistics)
The inflation problem has been centered on the pressure from expensive labor. But material costs are also edging a little higher. Another monthly rise of 0.2 percent (overall PPI and "core," which excludes food and energy) probably occurred last month. This could be the story on material costs through the winter and spring. The idea that a slowing economy is slowing inflation is disproved by higher labor and material costs. That inflationary pressure is building, even as the Federal Reserve cuts interest rates, presents a real dilemma — one that could stretch right into 2009.
Wednesday, January 16
8:30 am Consumer Price Indexes (Bureau of Labor Statistics)
While wholesale inflation is rising by 0.2 percent, retail inflation is probably rising by 0.3 percent. The difference is primarily the cost of labor in producing retail goods and services. The second reason has to do with higher transportation costs, due to higher fuel costs. And all of these trends are likely to remain in place, even as the economy remains in slow mode.
9:15 am Industrial Production and Capacity Utilization (Federal Reserve Board)
Industrial output fell in December and might keep falling. Flat to slight declines in non-auto retail sales combined with declines in new orders for durable goods, and vehicle sales stuck in low gear, all combine to generate too little demand to allow industrial output to rise. In fact, the manufacturing and home building sectors are in recession. The question is whether other sectors (wholesale trade, transportation, etc.) might soon follow. This is a story that will be unfolding over the course of this winter and early spring.
Thursday, January 17
8:30 am Housing Starts and Building Permits (Bureau of the Census)
Home building was very slow in November. Indeed, home building could remain at about its current low pace for the next few months, but unlikely to slow substantially further.
Friday, January 18
10:00 am Composite Indexes of Leading, Coincident and Lagging Indicators (The Conference Board)
The Leading Economic Index was soft all through 2007, signaling that growth would slow sharply. The Coincident Economic Index, which tells us where we are right now, softened late in the year. Did any of these trends continue in November?
BY THE END OF THE WEEK
The US economy is slow and might even slow further. Lowering interest rates now may help later in the year-it is not a short-term solution. The housing slump, financial market turmoil, higher gas prices, higher food prices, and now the uptick in overall inflation have all contributed to weaken consumer and business expectations and have resulted in less spending and investment growth (and less hiring). Economic growth is better in Euro land but growth is beginning to weaken a little there too. In addition, Japan is losing some steam, as indicated in the latest Leading Economic Indicators report for Japan prepared by The Conference Board. Altogether, the global economy heads into a new year with less momentum than was the case at this time a year ago. There are questions about how much damage financial turmoil will cause to equity markets abroad. Moreover, with $100 for a barrel of oil now, the question is how much higher these prices could be driven. The best thing to say about 2008 is that it will be over in 12 months.
