Key U.S. Data Releases and Events

Indicators next week will continue to support this evolving picture, with industrial production expected to eke out another gain in February, while inflation indicators should be completely benign. The housing market, however, remains on the "worry bead" list, as February starts are likely to take a hit from bad weather and home sales have been relatively weak.

The FOMC is expected to keep a steady hand on the tiller at its meeting on February 16: sticking to its relatively accommodative policy stance by maintaining the 0.00–0.25% target range for federal funds, while retaining the "exceptionally low rates for an extended period" language. The Fed will want to keep the waters as calm as possible as it moves to phase out asset purchases at the end of March.

KEY U.S. DATA RELEASES THIS WEEK

Monday, March 15 – Industrial Production (Feb.)

• IHS Global Insight: 0.3%
• Consensus: 0.0%
• Last Actual: 0.9% (Jan.)

What to Look For

• Industrial production should climb, but not by much under the weight of bad weather.

Implications

The utility sector should benefit from a colder-than-normal winter month, but heavy snow in the mid-Atlantic states disrupted manufacturing and triggered a steep drop in hours worked during the employment survey week. That disruption did not pull down the whole month, though, and apart from motor vehicles we still expect that manufacturing output rose. But there was a cut in motor vehicle output after a very strong January performance, partly due to Toyota's temporary shutdowns.

Tuesday, March 16 – Housing Starts and Building Permits (Feb.)

Starts

• IHS Global Insight: 0.546 Mil.
• Consensus: 0.570 Mil.
• Last Actual: 0.591 Mil. (Jan.)

Permits

• IHS Global Insight: 0.610 Mil.
• Consensus: 0.602 Mil.
• Last Actual: 0.621 Mil. (Jan.)

What to Look For

• Starts expected to drop by 8%, largely due to terrible weather.
• Permits are expected to decline by 1.8% in response to slower new home sales.

Implications

Three major snowstorms swept across heavily populated states during February. The storms were especially disruptive because they hit big cities not accustomed to major snowstorms. Over 46 inches fell on Washington D.C., during February, breaking a previous record of 34.9 inches, and shutting down most federal government offices for four-and-a-half days. New York City was hit with 10 inches on February 10 and another 21 inches February on 25-26. Housing starts will be down in the Midwest and Northeast, but especially in the South because of weather. Had weather conditions been normal, housing starts in February would probably still be down slightly, since the pace of new home sales has fallen. Because of the snow, we are expecting a sizable 8% drop in starts, to 546,000. Permits should also be down because new homes are getting harder and harder to sell.

Tuesday, March 16 – FOMC Rate Decision

• IHS Global Insight: 0.00–0.25%
• Consensus: 0.00–0.25%
• Last Actual: 0.00–0.25%

What to Look For

• The FOMC should keep the target range for the federal funds rate unchanged.
• We expect they will also repeat the "exceptionally low rates for an extended period" mantra.

Implications

We expect the Federal Open Market Committee will vote to keep the federal funds rate unchanged in the 0.00–0.25% target range, and that they repeat the "exceptionally low rates for an extended period" (EE) mantra. The FOMC will reference further strengthening in the economy recovery, but continuing constraints on household spending due to tight credit, modest income growth, and lower housing wealth. Businesses remain reluctant to hire, and resource slack in the labor markets remains historically high. Inflationary pressures remain contained. The Fed will stick to its pre-announced plan to phase-out asset purchases by the end of March, but will stand ready to adjust those programs if conditions warrant. We could see a dissenting vote on the EE phrase, similar to what we saw at the FOMC meeting in January.

Wednesday, March 17 – Producer Price Index (Feb.)

Total

• IHS Global Insight: -0.6%
• Consensus: -0.2%
• Last Actual: 1.4% (Jan.)

Core

• IHS Global Insight: 0.1%
• Consensus: 0.1%
• Last Actual: 0.3% (Jan.)

What to Look For

• After January's sharp 1.4% increase, the producer price index is poised to drop 0.6% in February, when energy prices retreated.

Implications

The inflation measure is expected to tumble 0.6%, as gasoline and fuel oil prices likely plummeted more than 7% while food prices moved sideways. Excluding food and energy, core producer prices should inch up just 0.1%. Production is picking up as the recent inventory cycle expires, and materials prices are rising, but pricing power for finished goods is limited.

Thursday, March 18 – Consumer Price Index (Feb.)

Total

• IHS Global Insight: 0.1%
• Consensus: 0.1%
• Last Actual: 0.2% (Jan.)

Core

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

What to Look For

• Consumer prices should inch up 0.1%.

Implications

Energy prices should be down slightly, due to lower gasoline prices. Food prices are expected to match or exceed January's 0.3% increase. Excluding food and energy, core consumer prices are projected to edge just 0.1% higher. Core prices actually fell in January, but we do not believe that signals deflation.