Recent key economic indicators have been positive, with evidence that the recovery is finally broadening beyond manufacturing to services, and that positive job growth could be just around the corner. Right now the main drag seems to be depressed housing and construction activity, which is a key driver of employment, building materials, and freight activity.
The January trade balance is expected to widen slightly in response to higher oil prices. February retail sales are expected to be close to flat; lower auto sales should be offset by higher sales in other major channels. Finally, consumer sentiment will likely tick upwards on brighter economic prospects and higher equity prices.
On the policy front, the key issue at play is the "Job Creation Bill." The Senate has approved a $15-billion version that includes incentives to hire workers. The House has added minor amendments, and the bill is now moving back to the Senate. The spending in the bill is relatively limited, and it is expected to have only a modest impact on hiring. Other key legislation currently pending includes the extension of unemployment insurance, extensions to Medicare funding, and dealing with the expired surface transportation bill—a bottleneck that is currently holding up the disbursement of federal highway funds to the states.
KEY U.S. DATA RELEASES THIS WEEK
Thursday, March 11 – Trade Balance (Jan.)
- IHS Global Insight: -$40.9 Bil.
- Consensus: -$41.0 Bil.
- Last Actual: -$40.2 Bil. (Dec.)
What to Look For
- We expect the trade deficit to widen to $40.9 billion in January, from $40.2 billion in December.
Implications
Higher oil prices should push up the bill for imported oil. Export and import volumes both surged in December, and January may see a pause in trade growth. In particular, exports and imports of aircraft will probably fall after sharp increases last month. But the underlying recovery in global trade will continue.
Friday, March 12 – Retail Sales (Feb.)
Total
- IHS Global Insight: -0.1%
- Consensus: -0.2%
- Last Actual: 0.5% (Jan.)
Less Autos
- IHS Global Insight: 0.2%
- Consensus: 0.1%
- Last Actual: 0.6% (Jan.)
What to Look For
- Retail and food service sales dipped an estimated 0.1% in February.
- Excluding motor vehicle dealers, sales edged up 0.2%.
Implications
February results were held back by a drop in unit sales of light vehicles, lower gasoline prices, and severe winter storms. The ICSC index of comparable chain-store sales increased a surprisingly strong 1.0% (month-on-month) in February, suggesting some upside risk to our projection. The rebound in the stock market appears to be boosting sales of apparel and luxury goods, but it will take an upturn in employment to generate robust growth across sales channels.
Friday, March 12 – Michigan Consumer Sentiment Index (Preliminary Mar.)
- IHS Global Insight: 75.0
- Consensus: 74.0
- Last Actual: 73.6 (Final Feb.)
What to Look For
- The index of consumer sentiment is projected to advance from 73.6 in February to 75.0 in early March.
Implications
Recently, there have been some encouraging signs that the growing economy will soon be creating jobs. A combination of rising incomes, mild inflation, and recovering household net worth should sustain moderate growth in consumer spending.
