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Will the Fed shift its message?
Today’s soft UMich consumer sentiment survey raises the risks around a consumer slowdown. Of course, we’ve see that before from that data set and the consumer keeps on humming so it’s going to come down to the hard data.
October US retail sales are due next Tuesday and expected up 0.7% on the headline and 0.4% on the control group. I expect an upside surprise. There’s ample evidence that Christmas shopping is being pulled forward this year as consumers heed warnings about unavailability. Stores have also pulled forward sales.
That factor will be given back in Nov/Dec but for the October data, it will create the impression of a flush consumer. That should beat back today’s blip and reignite inflation talk.
Another front to watch will be manufacturing with the Empire Fed on Monday, industrial production Tuesday and the Philly Fed Thursday. The focus will be on pricing and commentary around pricing pass throughs.
Don’t overlook housing starts on Wednesday as well. That sector is showing fresh signs of life, despite all the naysayers.
On the Fed front, we will hear from Mester, Evans and Bostic. The schedule is light for now but that could change as more events are added.
I think it’s too early for Fed commentary around inflation and transitory risks to change. I’d circle the Dec 15 FOMC meeting and new dot plot as the first real opportunity for a communication shift, though the pressure is certainly rising.