Monday
- Empire State Manufacturing Survey, 8:30 a.m. (all times EST)
- Treasury International Capital (TIC report), 9 a.m.
- Jeffrey Lacker, President of the Richmond Federal Reserve (voter), speaks, 12:30 p.m.
Tuesday
- Housing Market Index, 10 a.m.
- Richard W. Fisher, President of the Dallas Fed (non-voter), speaks, 1:15 p.m.
Wednesday
- Housing Starts, 8:30 a.m.
- Energy Information Administration Petroleum Status Report, 10:30 a.m.
Thursday
- Gross Domestic Product (third and final third-quarter estimate, includes corporate profits), 8:30 a.m.
- Jobless Claims, 8:30 a.m.
- Existing Home Sales, 10 a.m.
- Philadelphia Fed Survey, 10 a.m.
Friday
- Quadruple Witching Options Expiration
- Personal Income and Outlays, 8:30 a.m.
- Chicago Fed National Activity Index, 8:30 a.m.
- Consumer Sentiment, 9:55 a.m.
- Kansas City Fed Manufacturing Index, 11 a.m.
This week will see the release of a lot of data! While many of the reports have the potential to move the markets, the timeliest of data are the regional Federal Reserve manufacturing surveys, which were conducted earlier this month. I am also interested in the housing metrics and the personal income and outlays report this week.
What do we know about manufacturing? Some have been concerned about the 2.2-point dip in the Institute for Supply Management's manufacturing survey, which shows a slight contraction in manufacturing with a headline print of 49.5
In the ISM data, released Dec. 3, we see that new orders dropped 3.9 points to a barely-growing 50.3. Other components of the report were hardly compelling. That leads some to believe that manufacturing is in a spell of softness. That might be true, but we need to consider more data series and consider coming months' data that aren't colored by Hurricane Sandy.
Note that the ISM data, like the regional Fed surveys this week, are -- well -- surveys. They're more sentiment indices than anything else, though they do strive to measure output and other data. It's just that those metrics aren't measured in dollars or widgets.
Hard data, as opposed to surveys, show a more compelling portrait, and that's particularly so for the Industrial Production data released Friday. Manufacturing output rose 1.1% in November following a decrease of 1% in October. Over the past year, manufacturing production is 2.7% higher.
It turns out that nearly all the decline in factory output in October is estimated to have been related to Hurricane Sandy, and the increase in November reflects a post-hurricane rebound in production. So Sandy might also explain the dip in the ISM index last month, meaning that report might not necessarily be a cause for concern.
Within manufacturing, increases were widespread in November across both durable and nondurable goods industries. The factory operating rate rose to 76.6%, a rate 2.2 percentage points below its long-run average.
The production of durable goods rose 1.6% in November, and was 5.3% above its year-earlier level. Output increased in all major categories of durables other than computer and electronic products, and aerospace and miscellaneous transportation equipment, which both decreased. Capacity utilization for durable goods manufacturing was 76.7%, a rate 0.4 percentage point below its long-run average.
The output of motor vehicles and parts, in particular, posted a strong advance, up 4.5% on the month, and is now 16.5% higher than a year ago. This may be reflected more in the Philly Fed survey, which has a greater automotive component than the New York Fed's Empire State Survey.
Note that the Empire State Survey includes more tech firms than does the Philly Fed survey. So, given the 0.2% dip in consumer and electronic products, there's a chance we can see a bit more softness in the former survey vs. the latter.
The output of nondurables rose 0.5% in November, and it was 0.6% above its year-earlier level. For November, most major categories of nondurables moved up, although we saw a dip down in the indices for petroleum and coal products and for chemicals. Capacity utilization for nondurable manufacturing was 77.9%, a rate 3 percentage points below its long-run average.
As a result, manufacturing is likely stronger than what we might infer from the ISM data alone. Of course, we'll have to see how the sector performs once the effects of Sandy have passed. Along with the storm disruptions to production, we also have replacement demand for things destroyed or damaged in the storm. New-car sales, in particular, have benefited from replacement demand. Teasing out these effects is not an exact science, but we can learn some effects by looking at geography.
It is in the two regional Fed districts where we will get data this week, Philadelphia and New York, that the effects of Sandy were most pronounced. Will we see a sharp rebound for the December surveys this week, or conversely, have some disruptions lingered?
Since the data might still be somewhat murky with storm-related vs. macro-related conditions in December, we might just want to keep an eye on these two metrics in coming months before we jump to any conclusions this week.
