Weekly Economic Indicators: Manufacturing Indices May Indicate Growth

 The full announcement schedule for the week of October 31st  is as follows:

  • Monday:  Chicago PMI
  • Tuesday:  FOMC Meeting Begins, Motor Vehicles Sales, ISM Mfg Index, and Construction Spending
  • Wednesday:  ADP Employment Report, FOMC Meeting Announcement, Chairman Press Conference   
  • Thursday:  Chain Store Sales, Initial Jobless Claims, Productivity and Costs, Factory Orders, ISM Non-Mfg Index, and Fed Balance Sheet
  • Friday:  Employment Situation

Click this link for the full economic calendar for the week.

The market is “chugging along”, rather than contracting, says Peter Costa, Trader and President of Empire Executions, and CNBC Market Analyst. He points out that big companies are the ones currently creating jobs in America. These companies have a lot of cash reserves and will have to make a decision whether to expand through acquisition(s), or grow organically by hiring more employees. Costa said, big acquisitions do not help the economy, but are good for market momentum, especially “Merger Mondays.” His biggest fear is deflation. Although some economies have experienced deflation and the Fed is always concerned about it, Costa believes higher commodity prices will offset any sign of deflation in the U.S. 

Motor Vehicle Sales: Costa expects motor vehicle sales to pick up into the holiday season. Automakers are eager to push out excess inventory, sales are beginning to pick up, and car manufacturers are in a good position to make deals at reasonable prices. He expects auto sales to continue to accelerate even more, as the economy gains some momentum. Costa commented that leasing is a big part of the auto industry, and when loans become available, it helps the entire economy. 

Non-Farm Payroll & Initial Jobless Claims: Costa expects the September unemployment rate to remain unchanged at 9.1% and does not think we will see big changes before the 1st quarter of 2012. This is in-line with his expectations for growth to pick up by the 1st quarter of next year. He does think the unemployment rate will eventually dip to 8.75%, but doesn’t expect to see much more improvement than that. He anticipates the jobless claims to be flat on Thursday, with no indications that it will fall below the 400K mark for a while.

ISM & Non-ISM Manufacturing (Mfg”) Index: Costa expects the ISM Mfg index to increase a little, as this is a leading indicator of future growth and the index will push the GDP numbers in about 3 months as the economy picks up growth. The Non-ISM Mfg Index will also do a little better, driven by high end retailers including Saks 5th Avenue, Tiffany’s, and Nordstrom’s. The middle tier retailers are expected to be flat or a little better. This tier includes WalMart, Sears, and Kohl’s. Lower end retailers are also expected to do better, including Family Dollar and 99 Cents Only Stores.  Costa pointed out that people don’t pay enough attention to these indicators, they focus more on jobs and inflation data. However, he has been paying attention to the ISM data as we are not in a true recovery.

FOMC Meeting: Costa is not expecting the Fed to do anything noteworthy at its meeting next week. The Fed has hinted in the past regarding expanding the bond purchasing program. Costa pointed out that banks are borrowing money at 1% interest rate and lending at 8% interest rate.    Still banks are hesitant to lend because they are afraid the government will say the loan to debt ratio is too low says Costa. But if small businesses can’t get a loans, then they will not survive.