Posted By: Tom Hustler

By James MehringFri Nov 10, 8:08 AM ET

Many economists believe the U.S. economy is beginning to work its way out of a mid-year funk. Consumers are expected to use the money freed up by lower gasoline prices to purchase other items, while businesses are expected to use their mountains of cash to fund even more investment projects. This widespread view will get its first real test this week, as a full round of figures on the economy's performance early in the fourth quarter become available.
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Despite expectations for stronger consumer and business spending this period, the consensus view for October looks fairly subdued on the surface. The median forecast for retail sales in October calls a rise of just 0.1%. However, another large drop in gasoline station receipts due to lower fuel prices could mask an otherwise solid report. Factory output is forecast to rise just 0.2%, but autos and fallout from the housing recession could also overshadow strong gains elsewhere.

If the activity numbers are disappointing, the business inventory figures for September, as well as the regional factory activity reports for November, deserve some extra attention. If consumers and businesses are holding back on spending, more unwanted inventories could pile up. Businesses would then resort to selling what's already in warehouses, which could dampen production and economic growth in the near term.

October inflation figures will also be released. Headline numbers should once again reflect lower energy prices, but the markets will be more interested in what's going on outside of energy and food. On a yearly basis, core consumer inflation has been accelerating. Economists, the Federal Reserve, and the bond market will be looking for any signs that softer growth in the middle two quarters is reducing price pressures.

Here's the weekly economic calendar, from Action Economics.

ReportDateTimeForMedian EstimateLast PeriodTreasury Budget (billion)Monday, Nov. 132 p.m.October-$48.0$56.0Retail SalesTuesday, Nov. 148:30 a..m.October0.1%-0.4%Retail Sales (ex-auto)Tuesday, Nov. 148:30 a..m.October0.1%-0.5%PPITuesday, Nov. 148:30 a..m.October-0.4%-1.3%PPI (ex-food & energy)Tuesday, Nov. 148:30 a..m.October0.2%0.6%Business InventoriesTuesday, Nov. 1410 a.m.September0.5%0.6%Empire State IndexWednesday, Nov. 158:30 a..m.November18.722.9CPIThursday, Nov. 168:30 a..m.October-0.2%-0.5%CPI (ex-food & energy)Thursday, Nov. 168:30 a..m.October0.2%0.2%Industrial ProductionThursday, Nov. 169:15 a.m.October0.2%-0.6%Capacity UtilizationThursday, Nov. 169:15 a.m.October82.0%81.9%Philadelphia Fed SurveyThursday, Nov. 1612 p.m.November5.2-0.7Housing Starts (million, annual rate)Friday, Nov. 178:30 a..m.October1.711.77

FEDERAL BUDGET - Monday, Nov. 13, 2 p.m. EST

The federal government is expected to post a deficit for October, the initial month of fiscal year 2007. The forecast $48 billion shortfall would be just a little larger than the October, 2005 amount of $47.4 billion.

In fiscal year 2006, the total deficit rung up by the government was 247.7 billion, vs. $318.7 billion in 2005. The surge in tax receipts from individuals and corporations surprised economists. Individual receipts rose 12.6%, while corporate receipts zoomed up over 27.2%. Meanwhile, total budget outlays grew another 7.4%.

The key for another pleasant budget surprise will most likely hinge on revenues once again. Any downshift in economic growth would weigh on income tax revenue growth.

Meetings Of Note

Tuesday, Nov. 14, 12 p.m. EST

Federal Reserve Bank of Boston President Cathy Minehan speaks at a New England Women in Real Estate luncheon in Boston, Mass.

12:30 p.m. EST

Federal Reserve Bank of St. Louis President William Poole addresses the CFA Society of Philadelphia in Wilmington, Del.

3:45 p.m. EST

Federal Reserve Bank of San Francisco President Janet Yellen speaks about community development at a San Francisco Fed sponsored event in Fresno, Calif.

ICSC-UBS STORE SALES - Tuesday, Nov. 14, 7:45 a.m. EST

This weekly tracking of retail sales, compiled by the International Council of Shopping Centers and UBS bank, will update buying activity for the period ending Nov. 11. Sales posted a solid 1% gain in the week ended Nov. 4, after easing 0.2% in the previous period, and 1.1% in the week ended Oct. 21. Sales were up 2.3% from a year ago for a second straight week.

RETAIL SALES - Tuesday, Nov. 14, 8:30 a.m. EST

October retail sales are not expected to be too impressive. Even excluding softer auto sales for the month, the rise is expected to be pretty subdued.

In September, sales appeared at first blush to be quite weak, diving 0.4% for the month and 0.5% excluding vehicle sales. However, the decline was due to a 9.3% plunge in gasoline station sales, which in turn was caused by falling gas prices. Strip out gas station sales and the monthly result was a 0.6% gain.

In August, overall sales were up just 0.1%, but the rise was 0.2% when stripping out the 1.3% decline in gas station sales. The decline in gas prices is expected to provide a boost to holiday sales.

PRODUCER PRICE INDEX - Tuesday, Nov. 14, 8:30 a.m. EST

Oil and natural gas prices are expected to lead the overall index lower for October. Back in September, the headline index fell by 1.3% as energy prices tumbled 8.4%. Less food and energy, prices for finished goods were up 0.6% in September.

The big fall in energy costs pulled the yearly rise in prices down to 0.9%, from 3.7% in August. Excluding energy, wholesale prices were up 1.2% from a year ago. That was a slightly faster than August, when prices rose just 0.9%, the smallest yearly gain in 30 months. The moderate rise in finished goods prices outside of food and energy would imply that most producers do not have a lot of ability to exert pricing power.

JOHNSON REDBOOK INDEX - Tuesday, Nov. 14, 8:55 a.m. EST

This weekly measure of retail activity will report on sales for the second fiscal week of November, ended Nov. 11. Sales in the first week ended Nov. 4 were up 0.3% compared to the same period in October. For the full month of October, sales were up 1.3% from September.

BUSINESS INVENTORIES - Tuesday, Nov. 14, 10 a.m. EST

Inventory levels are expected to have increased during September. In August, business inventories rose 0.6%, after a 0.7% gain in the prior month. The August increase was led by a 1.1% gain among wholesalers. Compared to a year ago, growth in business inventories accelerated to 7.7%, after climbing 7.4% in July.

Already for August, durable goods makers reported a 0.6% rise, while wholesalers saw inventories grow 0.8%. The recent pick up in inventories has pushed inventory-to-sales ratios higher. The ratio is a measure of how long it would take to sell the current level of inventories. Up until now, the inventory-to-sales ratio was not showing inventory growth outpacing sales. However, both the wholesale and factory ratios were both up a bit in September. A rising inventory-to-sales level would imply that businesses might need to scale back purchasing or production.

FOMC MINUTES - Tuesday, Nov. 14, 2 p.m. EST

The Federal Reserve will release the minutes of the two-day Open Market Committee meeting held on Oct. 24 and 25. The post-meeting press release didn't show much shift in the central bank's view of the economy or interest rates. However, economists will want to look at the minutes to assess the tone of the discussions and see if any members may be shifting their views on growth and inflation.

MORTGAGE APPLICATIONS - Wednesday, Nov. 15, 7 a.m. EST

The Mortgage Bankers Association releases its numbers on mortgage application volume for both home buying and refinancing for the week ending Nov. 10. The purchase index jumped 7.1%, to 402.2, as buyers took advantage of lower mortgage rates. In the prior week, the index stood at 375.6. The refi index also shot up, hitting 1897.9, from 1709.2 for the week ended Oct. 27.

The average 30-year fixed-rate mortgage held at 6.24% for the period ended Nov. 3.

The four-week moving average for the purchase index rose to 386.2, from 381.5. At the same time, the four-week average for the refi index rebounded to 1788.9, after slipping to 1778.7 in the week ended Oct. 27.

EMPIRE STATE MANUFACTURING SURVEY - Wednesday, Nov. 15, 8:30 a.m. EST

The New York Federal Reserve Bank releases the November survey of business conditions for manufacturers in the New York Fed district. The latest index reading is expected to ease a little in November. The October index zoomed up to 22.9, from 13.8 in September, and 11 in August.

Meanwhile, the new orders index retreated for a second straight month in October, to 11.8, from 14 in September. The shipments index rose for a third straight month. The slip in new orders and rise in shipments is probably why the unfilled orders reading turned negative, indicating a decline in the backlog.

Respondents lowered their expectations of the coming six months for a third straight period. The general business conditions index was 30.2 in October, from 35.2 in the prior month. The new orders and shipments indexes slipped, but the unfilled orders improved slightly. Expectations regarding capital spending were a little less optimistic.

Meetings Of Note

Thursday, Nov. 16, 9:10 a.m. EST

Federal Reserve Board Governor Randall Kroszner gives a keynote address at the Cato Institute's annual monetary policy conference in Washington, D.C.

9:45 a.m. EST

Federal Reserve Bank of St. Louis President William Poole takes part in a panel discussion entitled "Responding to Financial Crises: What Role for the Fed?" at the Cato Institute's annual monetary policy conference in Washington, D.C.

10 a.m. EST

Federal Reserve Board Governor Susan Schmidt Bies gives a keynote speech on the U.S. perspective of the Basel II bank-capital accords at the "2nd EU/US Retail Banking Forum Conference" in Washington, D.C.

JOBLESS CLAIMS - Thursday, Nov. 16, 8:30 a.m. EST

Jobless claims jumped to a three month high of 327,000 in the week ended Nov. 4. For the week ended Oct. 28, claims were revised up slightly to 308,000.

The four-week moving average edged down to 311,250, from 311,500 in the week ended Oct. 28. Continuing jobless claims for the week ended Oct. 28 rose to 2.45 million, from 2.4 million in the prior week.

CONSUMER PRICE INDEX - Thursday, Nov. 16, 8:30 a.m. EST

Falling energy prices are forecast to push the consumer price index lower for October. The consensus estimate is for a 0.2% fall in the overall index.

The September index dropped 0.5% on a 7.2% drop in energy prices. Motor fuel prices fell 13.5% during the month, while fuel oils for heating dipped 4.9%. Minus food and energy, consumer prices actually edged up 0.2% for a third straight month.

For the first time in about four years, the yearly pace of core inflation is outpacing the overall level. In September, the overall index was up 2.1% from a year ago vs. 2.9% without food and energy. In August, the yearly gains were 3.8% and 2.8%, respectively. Based on the forecasts for October, the yearly pace of headline inflation should slow even further.

REAL EARNINGS - Thursday, Nov. 16, 8:30 a.m. EST

Inflation-adjusted weekly earnings of production workers most likely posted a healthy gain of 0.9%. That's based on the Labor Dept.'s employment report showing a 0.7% rise in average weekly earnings and the consensus forecast of a 0.2% decline in the October consumer price index.

Real earnings popped up 1% in September as prices eased and earnings climbed higher. Compared to the same period a year ago, inflation-adjusted earnings were up 2.2% in September.

INDUSTRIAL PRODUCTION - Thursday, Nov. 16, 9:15 a.m. EST

U.S. industrial output is forecast to have rebounded slightly in October. Industrial production dropped 0.6% in September, after holding steady in August. Output by utilities plunged 4.4%. And one sign of housing's impact on the economy, production of construction supplies eased for a second straight month.

Despite the monthly decline in September, the yearly growth rate rose to 5.6%, from 4.8% in August. The rise was caused by an even bigger output decline in September of 2005 resulting from Hurricane Katrina.

Manufacturing production slipped 0.3% in September, after a gain of 0.2% in August. Motor vehicle production fell 2.1% in September and machinery output declined 1%. Compared to a year ago, overall manufacturing output was up 6.3%, from 6% in August, and 6.2% in July.

The average operating rate for all industries is expected rise a little in October. Overall capacity utilization stood at 81.9% in September, down from 82.5% in August.

PHILADELPHIA FED SURVEY- Thursday, Nov. 16, 12 p.m. EST

The Philadelphia Federal Reserve Bank's October factory activity index for the mid-Atlantic region is expected turn positive again. The October index fell short of forecasts, easing to -0.7, from -0.4 in September. The two negative results followed an August rally to 18.5.

The October survey beyond the headline result was brighter. The new orders index hit 13.4, from -1.3 in September. The shipments index also turned positive, after slipping below zero in September. However, the region's manufacturers continued to clear through order backlogs, with the unfilled orders index dropping to -11.1, from -5.3 in September. The negative reading means that more respondents reported a drop in backlogs than a rise.

More manufacturers in the region were feeling better about conditions for the coming six months. The October general business activity index jumped to 16.7, the highest level since May. The index was -0.2 in September. The new orders and shipments indexes improved significantly, while the unfilled orders reading for October turned positive, after falling to -3.9 in September.

HOME BUILDERS SURVEY - Thursday, Nov. 16, 1 p.m. EST

The National Association of Home Builders and Wells Fargo bank issue its November Housing Market Index. The report measures housing market conditions by surveying builders' on current sales, buyer traffic through model homes, and expected demand.

The index finally stopped falling in October, inching back up to 31. The September reading was 30, down from 33 in the prior month, and the recent peak of 72 last June. The September reading was the lowest since February of 1991. A reading below 50 indicates that more surveyed builders view conditions as poor than good.

The bump up in the October index was driven largely by builders' expectations for sales in the coming six months. The gain would appear to indicate that builders feel they are near the bottom of the housing recession. The component rose to 41 in October, from 37 in September. The index for prospective buyer traffic inched up to 23, from 22 in the prior month. The present single-family home sales index held at 32.

Meetings Of Note

Friday, Nov. 17, 8:45 a.m. EST

Federal Reserve Bank of Cleveland President Sandra Pianalto makes opening remarks at a Cleveland Fed conference on universities, innovation and economic growth in Cleveland, Ohio.

9 a.m. EST

Office of Federal Housing Enterprise Oversight James Lockhart plans to speak about the U.S. perspective on residential mortgage markets at the "2nd EU/US Retail Banking Forum Conference" in Washington, D.C.

9:20 a.m. EST

European Central Bank Executive Board member Jose Manuel Gonzalez Paramo plans to speak about the EU perspective on residential mortgage markets at the "2nd EU/US Retail Banking Forum Conference" in Washington, D.C.

NEW RESIDENTIAL CONSTRUCTION - Friday, Nov. 17, 8:30 a.m. EST

Housing starts probably dipped again in October. Starts in September bounced back to an annual pace of 1.77 million, from 1.67 million in August and 1.76 million in July.

Despite the gain in September, the yearly pace of starts was still off 17.9%, from a 19.3% drop in August. Through the first nine months of the year, housing starts are off 8.1% compared to the same period a year ago.

Permits authorizing housing construction kept dropping in September, to an annual rate of 1.62 million, from 1.73 million in the prior month. Authorizations were off 27.7% from a year ago in September. The continued decline in authorizations implies additional declines in housing starts and activity.

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