The week ahead: FOMC, inflation, manufacturing and housing
The upcoming FOMC meeting should be the main event for financial markets in the week ahead. The policy statement and central tendency projections will be released on June 17 at 2:00pm (ET); and Ms. Yellen’s press conference begins at 2:30pm (ET). The policy statement is likely to sound a bit more positive relative to the April statement, although any change is unlikely to signal that tightening is imminent. We continue to expect the first rate hike to be announced at the September 16-17 FOMC meeting.
The overall CPI probably surged in May, thanks to a jump in gasoline prices; we forecast a 0.5% increase, the strongest since February 2013. We expect the core CPI rose 0.1% after a 0.3% rise in April, although the year to date pace in core inflation will still show a pickup versus last year's 1.6%y/y. We continue to believe that core inflation measures will move close to 2% in 2015 and accelerate to 2.2% in 2016. Although not high by historical standards, a rise in inflation is supportive of our view that the Fed will move to raise rates in September.
On the growth side, the focus will be on housing and manufacturing surveys. We expect that industrial production rose after declines in each of the prior five months. And regional Fed surveys of June manufacturing activity probably expanded a bit further after earlier weakness. Housing starts probably stayed strong in May, reversing only some of April's surge. We forecast a small increase in the housing market index in June as mortgage applications have been climbing.
The past week
Retail sales rebounded in May, and March and April were revised up. Sales picked up broadly. Through mid-Q2, real consumption is rising at a bit more than a 2 ½% annual rate (est) versus Q1. We're allowing for a 3.0% real consumption pace in Q2 in our 2.7% real GDP growth forecast. Through April, the consumer spending pace was a bit below that, but with positive momentum. Labor data pointed to faster wage inflation as job openings picked up further in April, and the ECEC labor compensation measure rose 4.9%y/y through March. (Read Report)
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Thursday, 11 June 2015
Thursday, 11 June 2015
- Deutsche Bank Markets Research
Source : UBS Global Research