The Business Week Ahead

Manufacturing is a major theme of the week with Empire State on Monday and Philly Fed on Thursday, a tandem of reports running at record strength and which will offer early assessments of October's activity. On Tuesday, the Federal Reserve will release the industrial production report which will offer definitive data on manufacturing activity during the hurricane-stricken month of September. Housing is also front and center with the housing market index on Wednesday, which slowed in the prior report, preceding Thursday's housing starts report that generally has been slowing. Clearly slowing has been existing home sales which will wind up on the week on Friday. Yet there are two other stand-out reports in week: the Beige Book on Wednesday in which wage pressure assessments will be closely watched going into the month-end FOMC and jobless claims on Thursday where a Puerto Rican effect may or may not emerge. The week winds up on Friday with Janet Yellen who, however, will be delivering a dinner speech to the National Economists Club after markets have closed.

Monday

Empire State Index for October

Consensus Forecast: 20.0

Consensus Range: 18.0 to 24.1

Overheating is the signal from Empire State's respondents who have been reporting sharply accelerating activity from already highly elevated levels. New orders are at 8-year highs while delivery delays are at record levels and consistent, aside from possible hurricane-related delivery delays that may be hitting the Northeast, with unsustainable activity that is clogging the supply chain. The index has far surpassed expectations at 24.4 and 25.2 the last 2 reports with forecasters seeing the October index coming in at 20.0.

Treasury Budget for September

Consensus Forecast: $3.0 billion

Consensus Range: -$3.0 to $48.0 billion

Ten months into fiscal year 2017, the government's deficit in July was tracking 10.6 percent above fiscal year 2016. The spending side is where the red ink lies with increases in Social Security payments and net interest. Higher receipts, led by individual income taxes, are only a partial offset to the rise in spending. The Econoday consensus for August is calling for a $3.0 billion surplus. Note the exact day of this release is still undetermined.

Tuesday

Import Prices for September

Consensus Forecast, Month-to-Month Change: 0.5%

Consensus Range: 0.2% to 0.8%

Export Prices

Consensus Forecast, Month-to-Month Change: 0.4%

Consensus Range: -0.1% to 0.5%

September's import prices are not expected to cool much from August, the result of hurricane-inflated energy prices. Econoday's consensus is a 0.5 percent gain vs August's 0.6 percent surge while export prices, which also rose 0.6 percent in August on the back of petroleum-related price strength in industrial supplies, are expected to increase 0.4 percent. Outside of one-time factors, however, there were indications of fundamental price increases in August as finished goods posted rare and wide increases.

Industrial Production for September

Consensus Forecast, Month-to-Month Change: 0.1%

Consensus Range: -0.9% to 0.8%

Manufacturing Production

Consensus Forecast,  Month-to-Month Change: 0.3%

Consensus Range: 0.0% to 0.6%

Capacity Utilization Rate

Consensus Forecast: 76.2%

Consensus Range: 75.4% to 76.5%

However much diffusion reports like Empire State have been recording strength, the Federal Reserve's industrial production report has been showing weakness for manufacturing: a 0.3 percent decline for the component in August, no change in July, a 0.2 percent gain in June, and a 0.5 percent drop in May. But the weakness in August was tied at least in part to one-time effects from Hurricanes Harvey and Irma and forecasters are calling for a 0.3 percent September gain. But the outlook for the total industrial production, the result of uncertainties over hurricane effects on mining and utility demand, is very wide, from minus 0.9 percent to plus 0.8 percent with the consensus at plus 0.1 percent. Capacity utilization is seen at 76.2 percent vs 76.1 in August.

Housing Market Index for October

Consensus Forecast: 64

Consensus Range: 63 to 66

Optimism among home builders eased noticeably in September though hurricane effects were hard to identify. Current sales dipped as did traffic which has been stubbornly weak through the whole expansion and reflecting lack of interest among first-time buyers. Forecasters see the housing market index holding unchanged at 64 in October.

Wednesday

Housing Starts for September

Consensus Forecast, Adjusted Annualized Rate: 1.170 million

Consensus Range: 1.150 to 1.210 million

Building Permits

Consensus Forecast: 1.230 million

Consensus Range: 1.190 to 1.280 million

Housing starts in August showed some effects from Hurricane Harvey with weakness in the South pulling down the annualized rate to 1.180 million though further details did show general strength for the key single-family component against sharp weakness for multi-family units. Permits, where weather effects are marginal, rose sharply to a 1.272 million rate where however contributions from single-family and mulita-family units were turned around, with the former soft and the latter strong. The Econoday consensus for total housing starts in September is 1.170 million for what would be a small decline with permits at 1.230 million and a more sizable decline.

Beige Book

Prepared for the October 31 & November 1 FOMC Meeting

"Modest-to-moderate" has unfortunately been the general economic refrain in the Beige Book all year, accompanied however by consistent warnings of labor market tightness and isolated wage pressures. If wage observations increase in intensity, expectations for Federal Reserve rate hikes could be heightened. The prior report cited the effects of Hurricanes Harvey and Irma that included general economic disruptions and specific trouble for oil and natural gas production. Weakness in auto sales was one observation of the last report which, given the giant replacement spike in September, is likely to be reversed in the latest edition.

Thursday

Initial Jobless Claims for October 14 week

Consensus Forecast: 240,000

Consensus Range: 235,000 to 250,000

Effects from Hurricanes Harvey and Irma have been clearly fading in jobless claims which came in at 243,000 in the October 7 week and only slightly above late August levels. But the effects of Hurricane Maria remain as a major wildcard as Puerto Rico where claims, which are no longer being estimated, have been dribbling in not due presumably to lack of joblessness in the territory but to lack of access to San Juan's unemployment office. Any effect, however, isn't the call among forecasters who see initial jobless claims coming in little changed at 243,000 in the October 14 week.

Philadelphia Fed Manufacturing Index for October

Consensus Forecast: 20.2

Consensus Range: 15.0 to 25.8

There are no words left to describe the intensity of strength being report by respondents to the Philly Fed manufacturing report. The headline, at 23.8 in September and well beyond Econoday's high estimate, only scratched the surface as new orders poured in at one of the strongest rates of the expansion with backlog orders and shipments among the very strongest in the 50-year history of this report. The consensus for the October index is 20.2.

Friday

Index of Leading Economic Indicators for September

Consensus Forecast, Month-to-Month Change: 0.1%

Consensus Range: 0.1% to 0.3%

Low short-term interest rates, high consumer expectations, and ISM manufacturing orders have been underpinning the index of leading economic indicators which rose 0.4 percent in August. But the hurricane-related spike in initial jobless claims will hold down September's results were the Econoday consensus is for only a 0.1 percent gain.

Existing Home Sales for September

Consensus Forecast, Annualized Rate: 5.300 million

Consensus Range: 5.100 to 5.400 million

Weakness in the Harvey-hit region of the South pulled down existing home sales by 1.7 percent to a 5.350 million annualized rate though sales in the West were also weak. Price strength has been slowing though supply of available homes on the market has remained very tight. The National Association of Realtors warned in the last report that hurricane effects could slow resales through the remainder of the year. Forecasters see September's results, a month hit by Hurricane Irma's strike on Florida, coming in a bit lower at 5.300 million.