Saturday, April 11, 2009

US Economic Indicators Preview (Week of 13 to 19 April 2009)

  • CPI & PPI (Mar): negative annual rates
  • Retail sales (Mar): rising due to rebound in car sales
  • First regional manufacturing indices (Apr): stabilizing, albeit still showing contraction
  • Industrial production (Mar): ongoing marked deterioration
  • Housing starts (Mar): falling back after surprisingly sharp increase
  • UMI consumer sent (Apr): unlikely to have risen again due to rapid increase in unemployment

Producer prices rose by a moderate 0.1% mom in February, after a sharp increase of 0.8% mom in January. March PPI could have remained unchanged mom and dropped to -2.2% yoy. There were conflicting signals from the energy side: gasoline prices went down temporarily in the statistically relevant middle of the month, whereas oil prices increased noticeably. However, the NAPM prices component was 31 - a level below 50 indicates falling prices. Furthermore, the prices-received component of the Philadelphia Fed index, for example, turned even more negative. We thus expect the increase in core PPI to have slowed to 0.1% mom in March, but the annual rate could have remained relatively high at 4.0%.

CPI increased by 0.4% mom in February, due to higher energy prices, and thus the annual rate did not enter negative territory. But this is likely to happen in March, as we expect CPI to have risen by 0.1% mom: average gasoline prices only went up slightly, and the retail sector will have offered price incentives in order to generate sales despite sharply rising unemployment. The annual rates could remain below zero, at least until the end of the summer. Core CPI is expected to have gone up by a mere 0.1% mom too, and the annual rate could fall slightly to 1.7%.

Retail sales only slipped by 0.1% mom in February, and excluding autos they actually rose by 0.7% mom, after having already jumped by 1.6% mom in January. Rebates and higher gasoline prices contributed positively, and thus retail sales performed relatively well in the first two months compared to the sharp plunge in Q4. We expect total retail sales to have gone up by 0.5% mom in March, as domestic vehicle sales recovered by a good 10% from their record low. However, as more than 2m jobs were lost in the first quarter, we forecast that retail sales less autos will have remained unchanged.

Business inventories are expected to have fallen by about 1.3% mom in February. We already know that the depletion in factory inventories accelerated to -1.2% mom, and wholesale inventories even went down by 1.5%. Retail inventories, which had decreased particularly markedly in the last few months, are also likely to have fallen significantly again.

The New York Empire manufacturing index reached a record low of -38.2 in March, whereas the Philadelphia Fed index improved by 6.3 points to -35, although relevant components deteriorated. The April surveys could show some improvement, as the ISM manufacturing index had gone up slightly for three months in a row. However, at -34, both the New York Empire manufacturing index and the Philadelphia Fed index would remain deep in contraction territory in April.

March industrial production could have fallen 1.5% mom again, as the inventory correction is far from over. Moreover, the labour market report revealed that aggregate working hours went down even more markedly than in the first two months, and utility output could have declined further, according to industry figures. However, car production, which recovered somewhat in February, has probably remained quite stable, given the improvement in sales. Capacity utilisation is likely to have declined to 69.5%, which is very low in comparison to the longterm average of a good 80%.

The NAHB index of homebuilders' activities, which had declined by 64 points to a record low of 8 between June 2005 and January 2009, seems to have begun to stabilise, and it could have remained at 9 in April.

The downward trend in housing starts came to a halt in February, when they went up by 22.2% mom, almost entirely due to a rebound in starts of multi-family homes. The more important starts of single-family homes also rose, albeit only slightly, by 1.0% mom. There could be some bottoming out in housing starts, as they are still near their record lows, but due to the vast supply of new and existing homes combined with a weak economy and sharply falling employment, residential construction is unlikely to pick up in the near future. In addition, starts of multi-family homes could well have suffered a setback. We thus forecast that total housing starts will have decreased to about 520k in March. Building permits could have remained more or less unchanged at 560k.

The University of Michigan's (UMI) consumer sentiment had recovered from its record low in December and January, only to fall back markedly in February, probably due to higher gasoline prices and the ongoing significant deterioration in the labour market. In March, consumer sentiment rose by one point to 57.3, but as the US lost more than 2 millions jobs in Q1, consumer sentiment is unlikely to improve again in April. In addition, the latest weekly ABC consumer comfort index fell back somewhat. We thus forecast that UMI's consumer sentiment will stagnate in April.


This report has been prepared by BHF-BANK Aktiengesellschaft on behalf of itself and its affiliated companies (together "BHFBANK Group") solely for the information of its clients.

The information and opinions in this document are based on sources believed to be reliable and acting in good faith, but no representation or warranty, express or implied, is made by any member of the BHF-BANK Group as to their accuracy, completeness or correctness. Opinions and recommendations are given in good faith but without legal responsibility and are subject to change without notice. The information does not constitute advice or personal recommendation, for which the duty of suitability would be owed, but may facilitate your own investment decision. Moreover, you should seek your own advice as to the suitability of an investment matter mentioned herein. Investors are reminded that the price of securities and the income from them can go down as well as up and that the past performance of an investment or a market is not necessarily indicative for future results.

This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete, and this document is not, and should not be construed as, an offer to sell or solicitation of any offer to buy the securities mentioned in it. BHF-BANK Group and its officers and employees may have a long or short position or engage in transactions in any of the securities mentioned in this document, or in any related securities.