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Manufacturing and inflation data will be the focus of economic reports this week. Monday’s calendar included data on manufacturing activity in the New York area in November and industrial production across the U.S. in October.

Below is the economic calendar for the week:

Monday: Empire State Mfg. Survey, Industrial Production                   

Tuesday: ICSC-Goldman Store Sales, Redbook, Producer Price Index, Treasury International Capital, State Street Investor Confidence Index, Housing Market Index

Wednesday: MBA Mortgage Applications, Consumer Price Index, Housing Starts, EIA Petroleum Status, FOMC Minutes

Thursday: Jobless Claims, Leading Indicators, Philadelphia Fed Survey

Friday: None

Inflation data would have been a big event a few months ago, but not now with the economy in a recession. However, data on housing will get plenty of attention with this sector having troubles finding a bottom. Data on same-store sales for the week will also get more attention than normal given the recent drop in spending.

Producer prices are expected to show a decline of 1.7 percent in October with the core, which excludes food and energy, rising 0.1 percent. Consumer prices are also expected to fall at a rate of 0.7 percent overall and up 0.1 percent at the core. The continued decline in energy prices is pushing down both producer and consumer prices, but this is occurring due to the global economic slowdown.

Speaking of energy prices, crude is trading just above $57 Monday. News of hijacking of a Saudi Arabian supertanker provided some strength for the commodity, as is the thought that OPEC is going to once again cut production quotas. Ultimately, supply and demand control prices and a global recession is keeping demand forecasts down.

Housing starts for October are expected to decline further to an annualized figure of 0.78 million units. This would be down from September’s 0.817 million pace. Inventory levels need to be brought down even further for starts to pick up once again, something that still hasn’t occurred. Millions of adjustable rate loans will be adjusted in the coming year and this too is a major concern for foreclosures. This could result in the government stepping in to force lenders to adjust notes to fixed rates to avoid a landslide of foreclosures.

Industrial production rose 1.3 percent in October, well above estimates for gains of 0.2 percent. However, September’s drop of 2.8 percent was revised even lower to a decline of 3.7 percent. In the past year, industrial production is down 4.1 percent. In related news, the Empire State Mfg. Survey came in at -25.4, slightly below expectations. A reading below zero shows that more manufacturers are seeing a contraction in activity than expansion. October and November have shown the severity of economic slowing with the September figure much higher at -7.4. Within the data, the employment index fell more than 25 points to -28.9 and the workweek component fell more than 15 points to -25.3.

The National Association for Business Economics [NABE] stated this morning that its latest survey shows that fourth quarter GDP will fall by 2.6 percent. They also project the recession will last well in 2009 with the unemployment rate hitting 7.5 percent. If the recession does start to ease in the third quarter of 2009, then analysts might be correct in their assumption that the stock market may have already bottomed. History shows that the stock market tends to find its bottom about 6 month ahead of the economy.


Jody Osborne

Senior Staff Writer & Options Strategist

Optionetics.com ~ Your Options Education Site

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