The Business Week Ahead

A week shortened by Monday's Martin Luther King holiday opens on Tuesday with Empire State and the year's first indication on the 2018 factory sector. Definitive data on December's factory sector come on Wednesday morning with industrial production where the outlook is surprisingly soft. The Beige Book was surprisingly soft all last year and the first reading on this year comes Wednesday afternoon, setting the stage for the month-end FOMC. Housing was the big strength of the year-end economy and solid performances are expected for December housing starts and permits on Thursday. Also on Thursday will be jobless claims where another sharp rise would raise questions over the strength of the January employment report. Consumer sentiment winds up the week on Friday and a bounce higher is the call.

Tuesday

Empire State Index for January

Consensus Forecast: 18.6

Consensus Range: 15.0 to 20.0

Forecasters are looking for continued strength in the January's Empire State index, at a consensus 18.6 vs December's 18.0. But there was a slight hint of weakness in the December report as unfilled orders contracted for a second month and hiring slowed noticeably. Six-month expectations for new orders were also down. Yet in general this report has been very strong for the last year and, as the first regional report to be released each month, has consistently and accurately telegraphed strength in subsequent reports including the Philly Fed and the Dallas Fed.

Wednesday

Industrial Production for December

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

Consensus Range: 0.3% to 0.8%

Manufacturing Production

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

Consensus Range: 0.0% to 0.5%

Capacity Utilization Rate

Consensus Forecast: 77.3%

Consensus Range: 77.2% to 77.8%

Econoday's consensus gain for December industrial production is 0.4 percent which would follow November's 0.2 percent rise. Mining rose in December but utilities dipped and it was in fact a 0.2 percent gain for the manufacturing component that set the modest pace of November's report. Vehicle and hi-tech production eased in November while the production of consumer goods fell noticeably. Based on factory hours in December's employment report, forecasters see the manufacturing component rising a moderate 0.3 percent to extend what has been a stubbornly soft trend for this series. Total capacity utilization in December is seen rising 2 tenths to 77.3 percent.

Housing Market Index for January

Consensus Forecast: 73

Consensus Range: 70 to 75

Confidence among the nation's home builders has been unusually strong. The traffic component was the highlight of the last housing market report, jumping to a long-term high and pointing to a buyer surge in the new home market. Current sales and future sales likewise hit long-term highs. Econoday's January consensus calls for only the slightest slowing in the housing market index to 73 from December's 74.

Beige Book

Prepared for the January 30 & 31 FOMC Meeting

"Modest-to-moderate" was once again the economic assessment of the last Beige Book released in late November. Consumer spending was said to be flat while growth in the factory sector was described as wide but still no more than moderate. And there was a hint of an imbalance in the last report which warned that a scarcity of skilled labor was constraining business growth.

Thursday

Housing Starts for December

Consensus Forecast, Annualized Rate: 1.280 million

Consensus Range: 1.230 to 1.320 million

Building Permits

Consensus Forecast: 1.300 million

Consensus Range: 1.270 to 1.330 million

A little give back is the call for December's housing starts and permits data which posted significant gains in November and October. Single-family homes, the dominant component in this report, have been the center of recent strength and have more than offset extending weakness for multi-family units. The consensus for December housing starts is a 1.280 million annualized rate vs 1.297 million in November with housing permits seen at a 1.300 million rate vs November's revised 1.303 million (1.298 million initially reported).

Initial Jobless Claims for January 13 week

Consensus Forecast: 250,000

Consensus Range: 239,000 to 265,000

Initial claims are expected to come in at 250,000 in the January 13 week compared to 261,000 in the January 6 week which was unusually high and which hinted at a possible rise in layoffs. The January 13 week is also the sample week for the January employment report which, together with the weakness in the January 6 week, will focus strong attention on this report.

Philadelphia Fed Manufacturing Index for January

Consensus Forecast: 25.0

Consensus Range: 21.0 to 31.8

New acceleration from an already enormously strong rate of growth was December's result for the Philadelphia Fed manufacturing index which is expected to slow a modest 1.2 points in January to 25.0. New orders poured in back in December with backlogs building and shipments moving out the door. Selling prices also showed traction in the last report.

Friday

Consumer Sentiment Index, Preliminary January

Consensus Forecast: 97.0

Consensus Range: 95.3 to 99.0

Though the consensus is up for January, consumer sentiment did slow noticeably in December especially toward the end of the month. Expectations were December's weakness offset only in part by a positive assessment of current conditions and much welcome improvement in inflation expectations. Econoday's consensus for the preliminary January consumer sentiment index is 97.0 which would compare with 95.9 in December and 98.5 in November.