Key Events This Week: An “Extremely Important” CPI Print, Retail Sales And Q3 Earnings
Following payrolls, economic data takes a back seat this week, and focus will turn to the start of Q3 earnings reports. The week ahead will center around the US CPI release on Wednesday but as DB’s Jim Reid notes, it might be a touch backward looking given that energy has spiked more recently and that used car prices are again on the march after a late summer fall that will likely be captured in this week’s release.
Elsewhere, Deutsche notes that a potentially more challenging US earnings season than that seen over the last year will commence with the big financials from Wednesday. In addition minutes from the last FOMC will give clues to the latest taper thinking on Wednesday as well. The IMF/World Bank meetings will generate plenty of headlines this week with their latest world outlook update tomorrow the highlight. The best of the rest data wise consists of JOLTS (Tuesday),which we think is a better labor market indicator than payrolls albeit a month behind, US PPI (Thursday) which will give a scale of building pipeline price pressures, US retail sales and UoM consumer sentiment (Friday), and China’s CPI and PPI (Thursday).
In terms of the main highlight it’s clearly US CPI mid-week. Here Jim Reid notes that “given my views that inflation risks have been massively understated this year I’ve been saying for months that these reports have potentially been the most important monthly data we have seen for years. But since they mostly come and go with a “meh… mostly transitory” and a relative whimper, I’ve clearly been wrong to over hype them. So ignore me when I say that this month’s report might not be that interesting.”
In any case, with energy soaring over the last month and signs of inflation pressures continuing to build elsewhere then I’m not sure we can read too much into this month’s figures. Take used cars. Given the 2-3 month lag between actual prices and their CPI impact, this month will more than likely reflect a softening of prices in the summer. However September saw prices rise +5.4% so this will probably show up towards the end of the year along with the recent rise in energy costs. DB economists expect a +0.41% headline (vs. +0.27% previously) and +0.27% core (vs. +0.10%) mom rate. This is a bit above consensus and would take the yoy rate to 5.4% (up a tenth) and 4.1% (unch) respectively.
Speaking of inflationary pressures, this morning has seen energy prices take a further leg higher, with WTI oil (+1.90%) moving back above $80/bbl for the first time since late 2014, whilst Brent crude (+1.42%) has moved above $83/bbl. European natural gas prices will continue to be an important one to follow amidst the astonishing price surge there, but the declines at the end of last week mean prices finished the week down by more than -45% since their intraday peak on Wednesday, before the comments from Russian President Putin that brought down prices.
Although it’s a second tier release normally, tomorrow’s JOLTS will be interesting in as far as it might confirm that the main labor problems in August were a lack of supply rather than demand. The report’s full value is reduced by it being a number of weeks out of date but there’s a reasonable argument for saying that this is a better gauge of the state of the labor market than the payroll release.
Outside of data, it’s that time again as earnings season gets going, with a number of US financials kicking things off from mid-week. In terms of the highlights, we’ll hear from JPMorgan Chase, BlackRock and Delta Air Lines on Wednesday. Then on Thursday, we’ll get UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp and Walgreens Boots Alliance. Finally on Friday, we’ll hear from Charles Schwab and Goldman Sachs.
Here is a day-by-day calendar of events, courtesy of Deutsche Bank
Monday October 11
Data: Japan preliminary September machine tool orders, Italy August industrial productionCentral Banks: ECB’s Villeroy, Centeno, Elderson, Lane, Holzmann, Hernandez de Cos and Fed’s Evans speak
Tuesday October 12
Data: Japan September PPI, UK August unemployment, Germany October ZEW survey, US September NFIB small business optimism index, August JOLTS job openings
Central Banks: Bank of Korea monetary policy decision, ECB’s Villeroy, Lane, Elderson, Knot, and Fed’s Vice Chair Clarida, Bostic and Barkin speak
Politics: US House of Representatives to vote on Senate-passed measure extending debt ceiling
Other: IMF release World Economic Outlook
Wednesday October 13
Data: Japan August core machine orders, UK August GDP, Euro Area August industrial production, US September CPI, China September trade balance
Central Banks: Federal Reserve release minutes from September meeting, BoE’s Cunliffe and Fed’s Brainard speak
Earnings: JPMorgan Chase, BlackRock, Delta Air Lines
Thursday October 14
Data: China September CPI, PPI, US weekly initial jobless claims, September PPI
Central Banks: Fed’s Bowman, Bostic, Barkin, Bullard, Daly and Harker, ECB’s Elderson, and BoE’s Tenreyro and Mann speak
Earnings: UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp, Walgreens Boots Alliance
Friday October 15
Data: EU September new car registrations, US October Empire State manufacturing survey, September retail sales, August business inventories, preliminary October University of Michigan consumer sentiment index
Central Banks: Fed’s Bullard and Williams speak
Earnings: Charles Schwab, Goldman Sachs
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Finally, focusing just on the US, the key economic data releases this week are the CPI report on Wednesday and the retail sales report on Friday. The minutes from the September FOMC meeting will be released on Wednesday. There are many speaking engagements from Fed officials this week.
Monday, October 11 – Equity markets open but bond markets closed for the Columbus Day holiday.
08:00 AM Chicago Fed President Evans (FOMC voter) speaks; Chicago Fed President Charles Evans will make introductory remarks at an award ceremony.
Tuesday, October 12
06:00 AM NFIB small business optimism, September (consensus 99.5, last 100.1)
10:00 AM JOLTS Job Openings, August (consensus 10,938k, last 10,934k)
11:15 AM Fed Vice Chair Clarida (FOMC voter) speaks: Fed Vice Chair Richard Clarida will take part in a virtual discussion at the Institute of International Finance annual meeting. Prepared text and moderated Q&A are expected.
12:30 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will give a virtual speech on inflation to the Peterson Institute for International Economics. Prepared text and audience Q&A are expected.
06:00 PM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will take part in a public radio podcast to be recorded live at the University of Richmond.
Wednesday, October 13
08:30 AM CPI (mom), September (GS +0.43%, consensus +0.3%, last +0.3%); Core CPI (mom), September (GS +0.32%, consensus +0.2%, last +0.1%); CPI (yoy), September (GS +5.44%, consensus +5.3%, last +5.3%); Core CPI (yoy), September (GS +4.14%, consensus +4.1%, last +4.0%): We estimate a 0.32% increase in September core CPI (mom sa), which would produce a one-tenth rebound in year-on-year rate to 4.1%. Used car auction prices have started to rise again, and we believe residual seasonality in the auto insurance category is swinging from negative to positive. We also expect a sizable pickup in medical services inflation as annual health insurance source data is incorporated. We believe supply chain bottlenecks and labor shortages boosted prices in several categories, such as new cars, household furnishings, recreation, and personal care. We expect stabilization in airfares and hotel prices following a large Delta drag in August, but we look for another soft education reading on the back of college tuition freezes and ARP Act aid. We estimate rent +0.32% and OER +0.28%, reflecting the strength in our shelter tracker but a drag from imputed utilities. We estimate a 0.43% increase in headline CPI (mom sa), reflecting higher restaurant, grocery, and energy prices.
02:00 PM Minutes from the September 21-22 FOMC meeting: The FOMC provided advance notice that tapering “may soon be warranted” at its September meeting. Mr. Powell revealed in the press conference that FOMC participants favor concluding the taper around mid-2022, which likely implies a tapering pace of $15bn per month.
04:30 PM Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will make remarks at a Fed Listens event with Oklahoma tribal leaders. Prepared text and moderated Q&A are expected.
08:00 PM Fed Governor Bowman (FOMC voter) speaks: Fed Governor Michelle Bowman will give a speech on monetary policymaking and the economic outlook at an event hosted by South Dakota State University in Brookings, South Dakota. Prepared text and moderated Q&A are expected.
Thursday, October 14
08:30 AM Initial jobless claims, week ended October 9 (GS 315k, consensus 320k, last 326k); Continuing jobless claims, week ended October 2 (consensus 2,686k, last 2,714k); We estimate initial jobless claims decreased to 315k in the week ended October 9.
08:30 AM PPI final demand, September (GS +0.6%, consensus +0.6%, last +0.7%); PPI ex-food and energy, September (GS +0.5%, consensus +0.5%, last +0.6%); PPI ex-food, energy, and trade, September (GS +0.4%, consensus +0.4%, last +0.3%): We estimate a 0.4% increase in PPI ex-food, energy, and trade and a 0.5% increase in PPI ex-food and energy, reflecting a pullback in the airfares category due to Delta variant but a boost from supply chain bottlenecks, labor shortages, and commodity prices. We estimate that headline PPI increased by 0.6% in September.
08:35 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will take part in a virtual discussion on the post-Covid monetary and financial environment hosted by the Euro 50 Group.
10:00 AM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will take part in a virtual panel discussion on inclusive growth hosted by the Aspen Institute.
01:00 PM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will give a speech at the Cornell Club in New York. Prepared text and audience Q&A are expected.
01:00 PM San Francisco Fed President Daly (FOMC voter) speaks: San Francisco Fed President Mary Daly will give an introductory speech and closing remarks at a conference hosted by her bank on “Equitable Access to Small Business Credit.” Prepared text is expected.
06:00 PM Philadelphia Fed President Harker (FOMC non-voter) speaks: Philadelphia Fed President Patrick Harker will take part in a virtual discussion on the economic outlook hosted by the Prosperity Caucus. Prepared text and audience Q&A are expected.
Friday, October 15
08:30 AM Retail sales, September (GS -0.8%, consensus -0.2%, last +0.7%); Retail sales ex-auto, September (GS -0.3%, consensus +0.5%, last +1.8%); Retail sales ex-auto & gas, September (GS -0.5%, consensus +0.3%, last +2.0%); Core retail sales, September (GS -0.3%, consensus +0.4%, last +2.5%): We estimate a 0.3% pullback in core retail sales (ex-autos, gasoline, and building materials) in September (mom sa). The Census measure is now somewhat elevated relative to other high-frequency spending measures, and we believe the Delta variant and the sunset of income-support programs weighed on some discretionary retail categories in the month, such as restaurants, sporting goods, and general merchandise. We estimate a 0.8% decline in headline retail sales, reflecting another decline in auto sales but higher auto and gas prices.
08:30 AM Import price index, September (consensus +0.5%, last -0.3%); Export price index, September (consensus +0.7%, last +0.4%)
10:00 AM University of Michigan consumer sentiment, October preliminary (GS 74.0, consensus 73.5, last 72.8); We estimate the University of Michigan consumer sentiment index increased by 2.2pt to 74.0 in the preliminary October reading.
11:45 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will discuss “Optimal Monetary Policy for the Masses” during a virtual research conference hosted by the Minneapolis Fed.
12:20 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will take part in a virtual panel discussion on “Monetary Policy and Macroeconomic Stars” hosted by the Bank of France.
Source: DB, GS, BofA