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The Week Ahead ...
The Week Ahead

Mon 17 Feb-Public Holiday.

13:30 Wed 19 Feb-Consumer Prices (Jan). Food prices are expected to have stayed roughly unchanged in January, while energy prices should have recorded a modest increase. Meanwhile, core consumer prices will have recorded some growth reflecting higher air fares and hotel rates.

The consensus expects a 0.3% rise in both the headline and underlying CPI. This implies annual growth of 3.2% and 2.6% respectively, unchanged from December.

13:30 Wed 19 Feb-International Trade (Dec). The trade deficit is expected to have widened from the $8-$8.5bn level reported in the previous two months, reflecting higher customs duties and lower manufacturers shipments. The consensus is estimating a deficit of about $10bn, the size assumed by the Commerce Department in its initial estimate of fourth quarter GDP.

13:30 Thurs 20 Feb-Housing Starts (Jan). It is likely that the bad weather subduing construction in December was a problem again last month. However, with the stock of unsold new homes currently quite low, a modest pick-up in starts is anticipated. The consensus expects a rise from 1.33mn to 1.35mn.

The Week Just Past

In his annual economic report to Congress, President Clinton said there was no risk of a resurgence in US inflation in the foreseeable future, adding that the current expansion was sustainable for at least the next five years-a more optimistic view than both the market and the Federal Reserve.

Retail sales grew in line with expectations in January, up 0.6% m-on-m. However, there was a downward revision to December's figure, from 0.6% to 0.3%.

On Thursday the Dow Jones Industrial Average breached the 7,000 level for the first time, boosted by a better performance among technology stocks. The buoyancy of the US equity market is reflected in the fact that it took the index 11 months to advance from 5,000 to 6,0000, but only four months to rise from 6,000 to 7,000.

Industrial production remained unchanged in January following a 0.5% gain in December. The capacity utilisation rate fell from 83.5 to 83.3. A weak month was expected following a sharp drop in the number of hours worked in the manufacturing sector, as reported in the nonfarm payrolls data.

Headline producer prices fell 0.3% in January following a 0.6% gain in December, and were 2.5% higher on an annual basis. The underlying rate, ex food and energy, remained unchanged on the month, and gained only 0.6% on the year. There was a sharp decline in both consumer food and oil prices.

The figures were much more subdued than expected, with the 0.3% drop in the headline rate reflecting the first monthly decline since October 1994. There are signs of inflationary pressures building at the crude level (up 15.1% y-on-y), although it remains to be seen how much of these pressures will be translated directly to the headline producer price level.

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