US treasury outlook: Bernanke to talk about the past year of economic crisis

13 Sep, 2009

US Treasury debt investors will have plenty of economic data to parse next week for clues on the extent of any economic recovery, including numbers on inflation and manufacturing. Federal Reserve Chairman Ben Bernanke could also give some insights on the health of the economy in a speech on Tuesday.
The highlight of the data is likely to be August retail sales on Tuesday. The median of forecasts from economists polled by Reuters is for retail sales to have risen by 2 percent after falling 0.1 percent in July. A good portion of the increase is expected to come from automobile sales, which were helped by a government incentive program. Ex-autos, retail sales are expected to have risen by a more modest 0.4 percent after a 0.6 percent decline in July.
"Retail sales soared in August, primarily because of the surge in vehicle sales due to the 'cash-for-clunkers' program, which has now expired," said Steven Wood, chief economist at Insight Economics in Danville, California. Wood is forecasting August retail sales rose by 2.5 percent, and by 0.3 percent ex-autos. Inflation will also be high on the agenda next week, with the release of the August producer price index on Tuesday and followed by the consumer price index on Wednesday.
The median of economists' forecasts is for core consumer prices, which exclude food and energy costs, to have risen by 0.1 percent following an increase of 0.1 percent in July. Such a reading for August would not be considered by analysts to be too high, although many remain worried price inflation could take off if the economy is in the midst of a substantial recovery and with the Treasury set to issue massive amounts of new government debt.
"We now know the economy is recovering and a lot of the focus will now shift to the question, 'will it be accompanied by higher-than-expected inflation?'," said Hugh Johnson, chief investment officer at Johnson Illington Advisors in Albany, New York.
Investors will also see an early clue to the state of the manufacturing sector on Tuesday with the release of the New York Federal Reserve's "Empire State" general business conditions index for September.
The index is expected to show the New York State factory sector showed growth for a second straight month with a reading of plus 14.00 from plus 12.08 in August. It was minus 0.55 in July. "The Empire State Manufacturing Survey improved further in September with factory activity expanding at a moderate pace," Wood said, adding "however, following 18 months of decline, the level of manufacturing activity remained very depressed."
The Federal Reserve on Wednesday will put out its figures on August industrial output, which is expected to have risen by 0.6 percent compared with a rise of 0.5 percent in July. Outside of the data, Bernanke will speak at 10 am Eastern time (1400 GMT) on Tuesday on the topic of "Reflections on a Year of Crisis." The government is not scheduled to auction any Treasury notes next week.

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