By Kevin Kastner
WASHINGTON (MaceNews) – With little key data scheduled and the Veterans’ Day holiday falling in the middle of the week, the October inflation readings will get their moment to shine – or to disappoint.
As has been the case since the FOMC shifted its emphasis on inflation to the backburner, it will take a major surprise in the price readings to raise any eyebrows.
Consumer price data will be released on Thursday and following a cascade of smaller monthly gains over the last three months, headline CPI is likely to disappoint further. Gasoline pump prices have declined over the last month as travel has been discouraged by rising COVID cases.
Within the core, which has also seen smaller gains in recent months, there is a chance of a slightly larger increase this month. A rebound in apparel prices is possible after back-to-school discounts pushed prices down by 0.5% in September.
For producer prices, which have been a bit more robust than consumer prices in recent months, another modest gain is expected.
Energy prices will remain tame, while food prices should pull back after the surge in the previous month.
The trade services component is expected to decline, reflecting smaller margins on energy commodities, while overall services are likely to be pulled lower on a reversal in prices of travel.
Within the core, look for an uptick in the prices of industrial supplies due to shortages of components relative to the brisk pace of demand.
Year/year rates of inflation have rebounded at both the producer and consumer levels from their lows early in the pandemic but have yet to return to their pre-COVID levels. Further upticks are expected in the coming months, but a massive resurgence of COVID cases would reduce demand and prices further.
CONSUMER SENTIMENT LIKELY TO DECLINE AFTER ELECTION
The preliminary Michigan Sentiment index for November should capture some post-election feelings, so expect a decline in the overall index. The index improved in October but reflected an improved outlook that offset concerns about the current situation. The same mix could occur for November, but increased uncertainty is likely to push the current conditions even lower.
The November IBD index will be released on Tuesday, a week later than normal so it can capture the effects of the election. The index rose in October but indicated at uncertainty about the election at that time.
JOBLESS CLAIMS SEEING SMALLER GROWTH, BUT STILL ELEVATED LEVEL
The level of initial claims fell by 7,000 to 751,000 in the October 31 week, still elevated but a large improvement from just a few months ago. The level of new claims is expected to decline further in the coming week, driving the four-week average down for the 15th straight week. An 842,000 level in the October 10 week rolls out of the equation this week.
Continuing claims fell by 538,000 to 7.285 million in the October 24 week. As with initial claims, the level of continuing claims should continue to decline in future weeks.
However, the fact remains that some of this improvement is due as much to an expiration of benefits as to actual job market improvements. Unless further stimulus measures are enacted, especially an extension of unemployment benefits, the number of workers eligible for benefits will continue to decline.
OCTOBER TREASURY BUDGET WILL BE A ROUGH START
The Treasury’s October budget statement will be the start to a year of intense borrowing as further stimulus measures are likely due to rising COVID-19 cases and a possible shift toward a more accommodative White House.
The congressional makeup, particularly in the Senate, should cap the size of future measures. However, even the budget hawks will need concede some further measures will be needed.
The Treasury posted a $134.5 billion budget gap in October 2019 to start off the last fiscal year. Look for a much larger gap in this year, with outlays sharply higher and receipts virtually unchanged or even lower if another round of economic shutdowns in needed.
Here are the key data events for the coming week (U.S. Eastern Time):
MONDAY, NOV. 9
No key data scheduled
TUESDAY, NOV. 10
6:00 am NFIB Small Business Index (Oct)
8:55 am Redbook Same Store Sales (Nov 7 Week)
10:00 am IBD Optimism Index (Nov)
10:00 am BLS Job Openings (Sept)
WEDNESDAY, NOV. 11
All Day Veteran’s Day Holiday
7:00 am Mortgage Bankers weekly applications (Nov 6 Week)
THURSDAY, NOV. 12
8:30 am Initial Jobless Claims (Nov 7 week)
8:30 am Consumer Price Index (Oct)
2:00 pm Treasury Budget Statement (Oct)
FRIDAY, NOV. 13
8:30 am Producer Price Index (Oct)
10:00 am Michigan Sentiment Index (Nov prelim)
1:00 pm Baker-Hughes Rig Count (Nov 13 week)
Separately, from Extract Analytics, the outlook for the upcoming week’s SPX is for some short-term headwinds, at least until there is an indisputable resolution of the election:
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Contact this reporter: kevin@macenews.com.
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