Key U.S. Data Releases and Events

Next week, we will get served a relatively lean entrée on indicators, with core consumer prices expected to be up a tame 0.2% in January, but December housing starts and permits are projected to continue sliding down the slippery slope. The February Philadelphia manufacturing survey should remain solidly in contractionary territory—ringing the same alarm bells sounded by the sharp February drop in the Empire survey. Finally, the minutes of the FOMC meeting from January 29-30 will be released on February 20, in conjunction with updated Federal Reserve central tendency forecasts. We expect that the Fed's real growth forecast for 2008 to be revised down by at least a quarter of a percentage point (depending on its assumptions for the fiscal-stimulus package in the second half of the year).

KEY U.S. DATA RELEASES AND EVENTS THIS WEEK

Wednesday, February 20 – Consumer Price Index (Jan.)

Total
Global Insight: +0.3%
Consensus: +0.3%
Last Actual: +0.3% (Dec.)

Core
Global Insight: +0.2%
Consensus: +0.2%
Last Actual: +0.2% (Dec.)

What to Look For

• Top-level consumer prices are expected to rise by 0.3%.
• Core consumer prices should be up only 0.2%.

Implications

We expect consumer prices to rise 0.3% in January. Energy prices should be up a modest 0.3%, for the smallest increase since September 2007. Food price increases are expected to push up the top line, however. Excluding food and energy, we look for the "core" rate to register 0.2%. Such a report would keep the Fed on target for a 50-basis-point cut in the federal funds rate in March. An upside surprise, though, would make the Fed wary of acting so aggressively.

Wednesday, February 20 – Housing Starts and Building Permits (Dec.)

Starts
Global Insight: 0.977 Mil.
Consensus: 1.010 Mil.
Last Actual: 1.006 Mil. (Nov.)

Permits
Global Insight: 1.026 Mil.
Consensus: 1.050 Mil.
Last Actual: 1.080 Mil. (Nov.)

What to Look For

• Housing starts are expected to decline by 2.9%.
• Building permits should drop a steeper 5.0%.

Implications

Single-family permits dropped 8.8% in December. Based on this reading, we project that single-family starts will drop by a similar amount in January. Multiple-unit starts plunged 40.3% in December, but this drop appears to be an outlier. Multi-unit starts should bounce back in January, but overall, starts will drop to 977,000 annualized units. We also expect recent trends to continue in permits, which drop another 5% to 1.026 million annualized units. The housing sector keeps shrinking, and declining residential investment will exert a massive drag on the economy in the first half of 2008.