@ Wall Street (May 14th- May 18th)
On the data front this coming week (May 14-18), inflation readings for April should show a negative impact from energy prices but steady trend movement elsewhere. Year-on-year comparisons, meanwhile, are now strong enough to make the Fed reluctant to ease again. Retail sales likely hit a minor pothole in April after a strong first quarter. Industrial production, however, is expected to have rebounded last month after flat-lining in February and March. Better manufacturing and a rebound at utilities were behind this. Finally, stronger permitting recently points to increases in housing starts in April.
Also this coming week, the Fed will release minutes from its April 24-25 meeting. We learned from this meeting that the support for another round of quantitative easing diminished as most Fed members expect a gradual acceleration in economic growth. Most Fed members would have to see the opposite to support further easing. The minutes could elaborate on this shift in thinking. We might also see some discussion as to what Fed members would have to see in the economy for them to sign on to QE3, including some discussion on the appropriate response to next year?s ?fiscal cliff? and the risks from the Eurozone crisis.
Tuesday, May 15 ? Consumer Price Index (Apr.)
Consumer prices are forecast to fall 0.1% in April as gasoline prices, which rose about 4 cents per gallon, failed to match the normal seasonal rise. Gasoline's 3.6% April drop after seasonal adjustment was matched, or approximated, in other oil-based products and pulled energy down by 2.5%.
Tuesday, May 15 ? Retail Sales (Apr.)
Retail sales likely contracted in April, after a relatively strong first quarter. There should be some payback, especially for building material, sporting goods, and clothing stores, which were boosted by unseasonably warm weather in recent months. With gasoline prices decreasing a bit, gasoline station sales will suffer. Light vehicle unit sales inched up in April, and retail sales used to estimate consumer spending should remain above water but exhibit weaker growth than in the past three months.
Wednesday, May 16? Housing Starts (Apr.)
March?s housing permit numbers, the highest since September 2008, point to higher housing starts in April and May. Our call is that starts climbed about 5% in April. Permits will be down on a decline in multifamily permits, which jumped 26% in March.
Wednesday, May 16 ? Industrial Production (Apr.)
A solid gain in light vehicles and a rebound in utility output should combine with expansion in core manufacturing to produce a 0.7% climb in total industrial production in April after two weak months. The utility gain is just a return to more normal weather from a record-warm March, but manufacturing production hours at work advanced by 0.5% and light vehicle unit production expanded to a 10.4-million unit annual rate from 9.7 in March. Total production hours worked expanded in April in the vast majority of both durables and nondurable goods industries to suggest a solid output gain.
