Inflation data will test "disinflation" optimism: 2/13/2023 - 2/17/2023
January's CPI report could challenge the narrative that inflation is trending down across a growing range of sectors in the U.S. economy.
Markets
Dow Jones: 33,869.27 (+0.50%) 📈
S&P 500: 4,090.46 (+0.22%) 📈
Nasdaq: 11,718.12 (-0.61%) 📉
*Stock numbers as of market close on February 10th
The economic calendar is packed to the brim in the week ahead, but inflation data will be most important to investors.
January's Consumer Price Index (CPI) from the Bureau of Labor Statistics is set for release Tuesday. It will be heavily scrutinized, particularly after Federal Reserve Chair Jerome Powell acknowledged the presence of "disinflation" in the U.S. economy.
Economists expect headline CPI to rise 0.5% month-over-month in January, a notable jump from figures seen in recent months. New seasonal adjustments released by the BLS on Friday also switched December's initial reading of a 0.1% monthly drop in headline inflation to an increase of 0.1% in the year's final month.
While the monthly CPI figure likely rose in January, the annual headline number is projected to come down to 6.2% from 6.5% the prior month, consensus estimates compiled by Bloomberg show.
Core CPI, which removes the volatile food and energy components of the report and is closely tracked by the Fed, is forecast to show a 0.4% rise over the month — on par with the upwardly revised 0.4% increase in December.
On an annual basis, economists expect core CPI to rise 5.5% over the year, down modestly from the annual 5.7% in December.
Policymakers monitor "core" inflation more closely due to its nuanced look at key inputs like housing, while the headline CPI figure has moved largely in tandem with volatile energy prices this year.
For Chair Powell, shelter inflation — a "stickier" component of CPI that has remained stubbornly high — is a key component of evaluating the path forward for interest rates. In a sit-down interview last week in Washington, D.C., Powell said he expects housing inflation to fall in the middle of the year.
"There has been an expectation that inflation will go away quickly and painlessly; I don’t think it’s guaranteed that’s the base case," Powell said last Monday at the Economic Club of D.C. "It will take some time."
The Producer Price Index (PPI) will give Wall Street another sense of how quickly prices are rising with a look at inflation at the wholesale level on Thursday. Meanwhile, the government’s retail sales report, due out Wednesday, is expected to show continued strength in consumer spending.
Over the prior month, PPI likely rose 0.4%, a jump from a decline of 0.5% reported in December. Economists expect an annual reading of 5.4%, down from 6.2% in December.
Retail sales are expected to have bounced back in January, rising 1.9% over the prior month following a 1.1% decline in December.
On Friday, U.S. stocks finished their worst week of the year after a strong start to 2023. The S&P 500 closed down 1.1% for the week, the Dow Jones Industrial 0.2%, and the Nasdaq Composite 2.4%.
Equity markets have rebounded sharply since December on bets the Federal Reserve may pause rate hikes sooner than expected following a steady downshift in recent rate hikes, but officials and strategists have continued to assert excitement around a pivot is premature.
On the earnings side, investors are nearing the final stretch of the reporting season. About 69% of companies in the S&P 500 index have reported results as of Friday, with just 69% of that share reporting earnings per share above estimates — below the five-year average of 77%, according to FactSet data.
In the week ahead, investors will get results from headliners, including Airbnb ABNB 0.00%↑, Coca-Cola KO 0.00%↑, DraftKings DKNG 0.00%↑, Paramount Global PARA 0.00%↑, and Deere DE 0.00%↑.
Events Calendar
Monday, February 13
Advance Auto Parts AAP 0.00%↑, Avis Budget CAR 0.00%↑, Denny's DENN 0.00%↑, IAC IAC 0.00%↑, Palantir Technologies PLTR 0.00%↑, Vornado Realty Trust VNO 0.00%↑
Tuesday, February 14
NFIB Small Business Optimism, January (91.0 expected, 89.9 during the prior month)
Consumer Price Index, month-over-month, January (0.5% expected, -0.1% during prior month)
CPI excluding food and energy, month-over-month, January (0.4% expected, 0.3% during prior month)
Consumer Price Index, year-over-year, January (6.2% expected, 6.5% during prior month)
CPI excluding food and energy, year-over-year, January (5.5% expected, 5.7% during prior month)
Real Average Hourly Earnings, year-over-year, January (-1.7% during the prior month, revised to -1.5%)
Real Average Weekly Earnings, year-over-year, January (-3.1% during the prior month, revised to -2.6%)
Airbnb ABNB 0.00%↑, Coca-Cola KO 0.00%↑, Conduent CNDT 0.00%↑, Devon Energy DVN 0.00%↑, GoDaddy GDDY 0.00%↑, Herbalife Nutrition HLF 0.00%↑, Marriott International MAR 0.00%↑, Peabody Energy BTU 0.00%↑, Restaurant Brands QSR 0.00%↑, TransUnion TRU 0.00%↑, TripAdvisor TRIP 0.00%↑, Upstart UPST 0.00%↑, Weber WEBR 0.00%↑
Wednesday, February 15
MBA Mortgage Applications, the week ended Feb. 10 (7.4% during the prior week)
Empire Manufacturing, February (-20 expected, -32.9 during the prior month)
Retail Sales Advance, month-over-month, January (1.1% expected,-1.1% during prior month)
Retail Sales Excluding Autos, month-over-month, January (0.8% expected, -1.1% during prior month)
Industrial Production, month-over-month, January (0.5% expected, -0.7% during prior month)
Capacity Utilization, January (79.1% expected, 78.8% during the prior month)
Manufacturing (SIC) Production, January (0.6% expected, -1.3% during the prior month)
Business Inventories; December (0.3% expected, 0.4% during prior month)
NAHB Housing Market Index, February (37 expected, 35 during the prior month)
Net Long-Term TIC Flows, December ($171.5 billion)
Total Net TIC Flows, December ($213.1 billion)
Biogen BIIB 0.00%↑, Boston Beer SAM 0.00%↑, Cisco Systems CSCO 0.00%↑, Fisker FSR 0.00%↑, Kraft Heinz KHC 0.00%↑, Krispy Kreme DNUT 0.00%↑, Marathon Oil MRO 0.00%↑, Roblox RBLX 0.00%↑, Roku ROKU 0.00%↑, Shopify SHOP 0.00%↑, The Trade Desk TTD 0.00%↑, Twilio TWLO 0.00%↑, Upwork UPWK 0.00%↑, Wyndham Hotels & Resorts WH 0.00%↑, Zillow ZG 0.00%↑
Thursday, February 16
Building Permits, January (1.350 million expected, 1.330 million during the prior month, revised to 1.337 million)
Building Permits, month-over-month, January (1.0% expected, -1.62% during the prior month, revised to -1.0%)
Housing Starts, January (1.361 million expected, 1.382 during the prior month)
Housing Starts, month-over-month, January (-1.6% expected, -1.4% during prior month)
New York Fed Services Business Activity, February (-21.4 during the prior month, revised to -13.7)
Initial Jobless Claims, the week ended Feb. 11 (200,000 expected, 196,000 during the prior week)
Continuing Claims, week Feb. 4 (1.695 million expected, 1.688 million during prior week)
Philadelphia Fed Business Outlook Index, February (-6.9 expected, -8.9 during the prior month)
PPI Final Demand, month-over-month, January (0.4% expected, -0.5% during prior month)
PPI Excluding Food and Energy, month-over-month, January (0.3% expected, 0.1% during prior month)
BJ Restaurants BJRI 0.00%↑, Bloomin' Brands BLMN 0.00%↑, Constellation Energy CEG 0.00%↑, ConEdison ED 0.00%↑, Crocs CROX 0.00%↑, Datadog DDOG 0.00%↑, DoorDash DASH 0.00%↑, DraftKings DKNG 0.00%↑, Dropbox DBX 0.00%↑, Hasbro HAS 0.00%↑, Hyatt Hotels H 0.00%↑, Paramount Global PARA 0.00%↑, Shake Shack SHAK 0.00%↑, WeWork WE 0.00%↑
Friday, February 17
Import Price Index, month-over-month, January (-0.1% expected, 0.4% during the prior month)
Import Price Index excluding petroleum, month-over-month, January (0.8% during the prior month)
Import Price Index, year-over-year, January (2.4% expected, 3.5% during prior month)
Export Price Index, month-over-month, January (-0.2% expected, -2.6% during prior month)
Export Price Index, year-over-year, January (5.0% during the prior month)
Leading Index, January (-0.3% expected, -0.8% during the prior month)
AMC Networks AMCX 0.00%↑, AutoNation AN 0.00%↑, Barnes Group B 0.00%↑, Deere DE 0.00%↑
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Inflation data will test "disinflation" optimism: 2/13/2023 - 2/17/2023
Great summation, shared.