WHAT’S ON TAP?

For the week of June 14th (in conjunction with Econoday):

The week is bombarded with economic news and we’ll get our first taste of Q2 earnings reports.  Let’s take a look at what’s on tap:

Monday –No major economic or earnings news.

Tuesday – Best Buy (BBY) reports earnings before the bell and could give investors the first glimpse into what this earnings season will be like.

The Empire State manufacturing index for May came in at 19.11, well above the break-even mark of zero to signal significant growth compared to April. However, the May number was notably below April’s 31.86, indicating moderation in growth.  June may also show moderation as May’s new orders index came in at 14.3—down from April’s 29.49.

Empire State Manufacturing Survey Consensus Forecast for June 10: 21.0

Housing starts in April advanced 5.8 percent to an annualized pace of 0.672 million units. April’s gain was led by a 10.2 percent increase in single-family starts while the multifamily component fell 18.6 percent.  We may see some slowing in starts in May as April housing permits declined 11.5 percent, following a 5.4 percent boost in March.

Housing starts Consensus Forecast for May 10: 0.650 million-unit rate

The producer price index eased to down 0.1 percent in April from a 0.7 percent spike in March. Declines in both food and energy helped pull the headline figure down.  At the core level, the PPI came in with a 0.2 percent increase, following a 0.1 percent uptick in March.  The key factor behind the boost in the core was cuts in discounts by auto dealers.  Gasoline price weakness should pull the headline number down for May.

PPI Consensus Forecast for May 10: -0.5 percent

PPI ex food & energy Consensus Forecast for May 10: +0.1 percent

Industrial production jumped 0.8 percent in April, following a 0.2 percent rise the prior month. But the all-important manufacturing component showed back-to-back 1.0 percent gains in the latest two months.  Although still soft, capacity utilization is on the rise, coming in at 73.7 percent overall for a 6 tenths gain from March. Looking ahead, we are likely to see a strong production number for May, given that production worker hours in manufacturing spiked 1.0 percent for the month.   Also, the ISM manufacturing index was healthy at 59.7 for the month.

Industrial production Consensus Forecast for May 10: +1.0 percent

Capacity utilization Consensus Forecast for May 10: 74.5 percent

The consumer price index in April dipped 0.1 percent after edging up to 0.1 percent the month before. Core CPI inflation was flat for two months in a row. At the headline level, a drop in energy prices weighed on costs while food was still moderately strong. The core was kept low by extremely soft shelter costs along with a decline in apparel.  Weakness in crude oil prices could give us a second consecutive negative number at the headline level.

Initial jobless claims for the June 5 week edged down 3,000 to 456,000.  But the four-week average–due to a 28,000 jump the May 15 week—rose for the fourth straight week to its highest level in three months to 463,000.  However, continuing claims fell a very steep 255,000 in the May 29 week to 4.462 million and the lowest level since late 2008.

Jobless Claims Consensus Forecast for 6/12/10: 450,000

Current Account  8:30 AM ET

The Conference Board’s index of leading indicators in April edged down 0.1 percent, following a 1.3 percent surge the month before. The latest number primarily reflected a decline in building permits and shortened delivery time. In contrast, the index of coincident indicators rose 0.3 percent in April, following a 0.1 percent boost the month before.  This index has been on an upward trend since July 2009.  We should see a rebound in the May LEI despite the downward tug from a drop in stock prices and building permits.  Positives are likely in the factory workweek, vendor performance, nondefense capital goods orders, interest rate spread, and consumer expectations.

Leading indicators Consensus Forecast for May 10: +0.6 percent

The general business conditions index of the Philadelphia Fed’s Business Outlook Survey in May edged higher to 21.4 from April’s 20.2.  But we may see a less robust number for June as the new orders index slipped in May to 6.1 from the 13.9 reading in April.

Philadelphia Fed survey Consensus Forecast for June 10: 20.0

Cullen Roche

Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.

He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.