Key U.S. Data Releases and Events

Beyond this noise, however, the fundamentals of the recovery continue to impress, with upward revisions expected to fourth-quarter 2009 productivity (and downward revisions to unit labor costs), while leading indicators on manufacturing and services should continue to progress in February. Real consumer spending is expected to pop up 0.4% in January, while core prices likely dropped.

Bottom line: the high productivity, low inflation recovery is still advancing. The Federal Reserve is expected to stay on the sidelines for quite a long time, but there is some risk that the Fed may have to ramp up direct credit market support again. Credit aggregates continued to deflate at alarming rates in early 2010.

KEY U.S. DATA RELEASES THIS WEEK

Monday, March 1 – Personal Income, Consumption and Prices (Jan.)

Personal Consumption, Nominal

• IHS Global Insight: 0.5%
• Consensus: 0.4%
• Last Actual: 0.2% (Dec.)

Personal Consumption, Real

• IHS Global Insight: 0.4%
• Last Actual: 0.1% (Dec.)

Core PCE Price Index

• IHS Global Insight: -0.1%
• Consensus: 0.0%
• Last Actual: 0.1% (Dec.)

Personal Income

• IHS Global Insight: 0.4%
• Consensus: 0.4%
• Last Actual: 0.4% (Dec.)

What to Look For

• Personal income to rise by 0.4%.
• Real consumption spending to advance 0.4%.
• Core PCE index to decline.

Implications

Wage and salary disbursements should post a respectable gain, since aggregate weekly earnings increased 0.5% in January, according to the employment report, as both hours worked and hourly earnings rose. In addition, federal government employees received a pay increase. We are not expecting much of a gain in personal interest income, however. Overall, we project that personal income increased 0.4% in January. With respect to spending, control retail sales increased 0.8% in January. Auto sales, however, were down. We are expecting spending on services to eke out a 0.2% gain. Overall, we project that consumer spending increased 0.5% in January. Adjusted for inflation, the gain should be 0.4%—a solid start to the year—but February is less promising, with consumer confidence slipping and snowstorms causing disruptions. The core CPI dropped in January and we project a similar drop in the core PCE deflator. Year-over-year, the core PCE deflator should be up just 1.2%, down from 1.5% in December, a reminder that inflation risks are remote.

Monday, March 1 – Construction Spending (Jan.)

Construction Put in Place

• IHS Global Insight: -0.7%
• Consensus: -0.5%
• Last Actual: -1.2% (Dec.)

Construction Excl. Residential Improvements

• IHS Global Insight: -0.9%
• Last Actual: -0.4% (Dec.)

What to Look For

• Single-family construction to be about flat, but multi-family is falling.

Implications

Based on the recent history of housing starts, we are expecting hardly any gain in single-family construction. Multi-family construction, however, is freefalling, and we see another substantial drop. Although nonresidential construction increased in December, we expect another down month. This category is a mishmash of several categories, some which are in deep recession (such as office construction), but others (such as a number of manufacturing categories) that are slowly getting back on track. A stimulus kick to infrastructure has yet to show up in the construction data. For example, state and local spending on roads and highways—the largest spending category—dropped nearly 7% over November and December. For January, we do not expect any gain. Overall, we estimate that construction spending fell 0.7% in January. Excluding improvements, spending will be down 0.9%.

Monday, March 1 – ISM Manufacturing Index (Feb.)

• IHS Global Insight: 59.0
• Consensus: 57.8
• Last Actual: 58.4 (Jan.)

What to Look For

• The ISM manufacturing index climbed just over a half point, from 58.4 to 59.0.

Implications

The Empire, Philadelphia Federal Reserve, and Chicago purchasing managers' surveys were unanimous that February was a solid month and a bit stronger than January. Orders and shipments should have remained solidly in the black, but the extra push should come from inventories no longer falling. The inventory component would add about 0.7 point to the overall index just by reaching neutrality, a feat achieved in both the Empire and Philadelphia inventory measures for February. Overall, output continues to advance, with strength exhibited in emerging export markets.

Tuesday, March 2 – Motor Vehicle Sales (Feb.)

• IHS Global Insight: 10.4 Mil.
• Consensus: 10.5 Mil.
• Last Actual: 10.8 Mil. (Jan.)

What to Look For

• We expect light-vehicles sales to decline to 10.4 million in February, from 10.8 million in January

Implications

The Toyota recall situation has created some uncertainty within the auto sales marketplace. As a result, we expect light-vehicles sales to decline to 10.4 million in February, from 10.8 million in January. Although some new car buyers will be switching to other manufacturers, we expect others to slightly delay purchases until the Toyota issues play themselves out.

Wednesday, March 3 – ISM Non-Manufacturing Index (Feb.)

• IHS Global Insight: 51.0
• Consensus: 51.0
• Last Actual: 50.5 (Jan.)

What to Look For

• The ISM index for non-manufacturing industries is expected to edge up about a half point in February.

Implications

While freight activity picked up in recent weeks, this was offset by a deterioration in financial market conditions, including lower equity prices and increased volatility in both equity and bond markets, while employment indicators have not signaled much improvement.

Thursday, March 4 – Productivity (Final Q4)

Nonfarm Business Productivity

• IHS Global Insight: 6.5%
• Consensus: 6.2%
• Last Actual: 6.2% (Q4, preliminary)

Unit Labor Costs

• IHS Global Insight: -5.7%
• Consensus: -4.4%
• Last Actual: -4.4% (Q4, preliminary)

What to Look For

• Productivity to be revised up, unit labor costs revised down.

Implications

We expect productivity to be revised up from 6.2% to 6.5% on an upward revision to output. Unit labor costs will be revised to show a larger drop, on lower compensation and stronger output growth.

Friday, March 5 – Employment Report (Feb.)

Nonfarm Payrolls

• IHS Global Insight: -100,000
• Consensus: -50,000
• Last Actual: -20,000 (Jan.)

Unemployment Rate

• IHS Global Insight: 10.0%
• Consensus: 9.8%
• Last Actual: 9.7% (Jan.)

Average Hourly Earnings (All Employees)

• IHS Global Insight: 0.2%
• Consensus: 0.2%
• Last Actual: 0.2% (Jan.)

What to Look For

• Payroll employment to be reduced by 100,000 to 150,000—February snowstorms were extremely disruptive.
• Unemployment rate will jump back up to 10.0%.

Implications

It is difficult to forecast nonfarm payroll employment in a normal month, but in February there is the added complication of a series of major snowstorms that slammed much of the country, especially the Mid-Atlantic states, during the week of the payroll survey. Based on the evidence from previous major snowstorms, we would expect payroll employment to be reduced by something in the region of 100,000–150,000. Without the storms, we probably would have anticipated a small increase in nonfarm payrolls, partly because government hiring of temporary workers for the 2010 Census should now be picking up. But with the weather disruption to normal activity, we now anticipate a loss of 100,000 jobs. The unemployment rate likely rose to 10.0%, up from 9.7% in January, although this expectation is less attributable to the storms than to the view that the surprise drop in January was more a random blip than the start of a sustained slide.