Economists keep trimming their fourth-quarter estimates for economic growth. Real gross domestic product was expected to grow around 2.5% at an annualized pace back in August, but the consensus estimate slipped below 2% in October. Now, some forecasters see the economy expanding at an anemic pace between 1% and 1.5%.
There's mounting concern surrounding consumer and business spending. Falling home values, rising gasoline prices, a softer labor market, and tighter credit conditions are expected to finally catch up with consumers. A first glimpse of consumer spending this quarter comes on Nov. 14 with the October retail sales figures. The median forecast calls for a respectable 0.3% rise. Some of that gain, however, will come in the form of stronger gasoline station sales due to elevated gas prices. Those extra dollars diverted to fill up vehicles amounts to an erosion in consumer purchasing power. That could spell trouble for retailers with the holiday shopping season approaching.
October industrial production and regional factory activity reports will shed light on both the current health of manufacturers and business spending. In the third-quarter, spending on business equipment and software actually picked up, but the odds are against another upside surprise. The Institute for Supply Management's recent manufacturing reports showed a deceleration in demand. The Federal Reserve's measure of factory output was soft in August and September. And although the weak Fed results were driven by falling auto production, the third-quarter GDP report showed a solid pickup in motor vehicle output. Unless the third-quarter figure is revised down, some payback in fourth-quarter auto output can be expected.
Slower economic activity should mean reduced inflation pressures in the economy, but the headline readings for October consumer and producer price indexes will be dominated by energy. In September, the consumer price index was up 2.8% from a year ago and it is likely to go higher in October. But investors will be focused on the prices outside of food and energy. So far this year, core inflation has trended lower.
This week's readings on economic activity and inflation are particularly important, since the November employment report is the only major monthly report coming out again before the Fed's Dec. 11 monetary policy meeting. If economic activity figures look weak and core inflation readings soften, it will raise Wall Street's hope of another rate cut before the end of the year.
The bond market will be closed on Monday, Nov. 12 in observance of the Veteran's Day holiday.
Here's the lineup for next week, from Action Economics.
Economic Reports
Report
Date
Time
For
Median Estimate
Last Period
Treasury Budget (billion)
Tuesday, Nov. 13
October
-$53.0
$111.6
Retail Sales
Wednesday, Nov. 14
October
0.3%
0.6%
Retail Sales (ex-auto)
Wednesday, Nov. 14
October
0.4%
0.4%
PPI
Wednesday, Nov. 14
October
0.2%
1.1%
PPI (ex-food & energy)
Wednesday, Nov. 14
October
0.2%
0.1%
Business Inventories
Wednesday, Nov. 14
September
0.3%
0.1%
CPI
Thursday, Nov. 15
October
0.3%
0.3%
CPI (ex-food & energy)
Thursday, Nov. 15
October
0.2%
0.2%
Empire State Index
Thursday, Nov. 15
November
20.0
28.8
Philadelphia Fed Survey
Thursday, Nov. 15
November
6.8
6.8
Industrial Production
Friday, Nov. 16
October
0.1%
0.1%
Capacity Utilization
Friday, Nov. 16
October
82.1%
82.1%