The Business News Week Ahead

Labor-market constraints and the risk of inflation will be the subtext for a week highlighted by an expected FOMC rate hike on Wednesday. Immediate pressures for consumer prices are not expected in a report that opens the week on Tuesday followed by producer prices on Wednesday where pressures tied to metal tariffs may not lift prices overall but will offer a reminder of the new threats they pose. Wednesday afternoon the FOMC takes the stage, likely raising rates in the latest installment of their gradualist policy and also updating their quarterly projections where any incremental increases for GDP or employment or inflation or future rate hikes could make the biggest headlines of all. Jerome Powell will also be giving his quarterly press conference. But one area the Fed has been downgrading is consumer spending where, however, the outlook may be improving based on the strong consensus for Thursday's retail sales report. Friday will offer a concentrated look at one area of the economy that hasn't been soft at all and that's manufacturing: Empire State will offer the first small-sample look at June's activity while industrial production will offer the first definitive conclusion on May.

Tuesday

Small Business Optimism Index for May

Consensus Forecast: 105.3

Consensus Range: 104.0 to 106.4

The small business optimism index is expected to come in at 105.3 in May vs April's 104.8. Strength in this index has been centered in business investment and earnings.

Consumer Price Index for May

Consensus Forecast, Month-to-Month Change: 0.2%

Consensus Range: 0.1% to 0.5%

Consumer Price Index

Consensus Forecast, Year-on-Year Change: 2.8%

Consensus Range: 2.3% to 2.8%

CPI Core, Less Food & Energy

Consensus Forecast, Month-to-Month Change: 0.2%

Consensus Range: 0.2% to 0.3%

CPI Core, Less Food & Energy

Consensus Forecast, Year-on-Year Change: 2.2%

Consensus Range: 1.9% to 2.3%

Forecasters are calling for no more than modest pressure in the consumer price report for May, at monthly gains of 0.2 percent overall and with the core rate also seen up only 0.2 percent. Year-on-year rates are expected to be mixed with the overall up 3 tenths to 2.8 percent but the core up only 1 tenth at 2.2 percent.

Treasury Budget for May

Consensus Forecast: -$144.0 billion

Consensus Range: -$156.0 billion to -$105.0 billion

Corporate tax receipts are sharply lower this year but not individual tax receipts which fed a strong $214.3 billion budget surplus in April that trimmed 2018's deficit, seven months into the fiscal year, to $385.4 billion which was still, however, 11.9 percent deeper than the year-ago pace. For May, forecasters see the monthly statement turning negative at a deficit of $144.0 billion.

Wednesday

PPI-FD for May

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

Consensus Range: 0.1% to 0.5%

PPI-FD Less Food & Energy

Consensus Forecast, Month-to-Month Change: 0.2%

Consensus Range: 0.1% to 0.3%

PPI-FD Less Food, Energy, & Trade Services

Consensus Forecast, Month-to-Month Change: 0.2%

Consensus Range: 0.2% to 0.3%

Unaccelerating rates at a modest tempo are expected for inflation at the wholesale level in May: at 0.3 percent for headline PPI-FD, at 0.2 percent excluding food and energy, and also at 0.2 percent when excluding food, energy and trade services. Steel and aluminum prices have been climbing but not enough yet to feed into overall producer inflation.

Federal Funds Target for May 12 & 13 Meeting

Consensus Forecast, Midpoint: 1.875%

Consensus Range: 1.75% to 2.00%

An incremental 25-basis-point rate hike is the unanimous consensus of Econoday's sample for the June FOMC, to a mid-point 1.875 percent within a 1.75 to 2.00 percent range. The strength of employment will likely be cited as the central factor for the rate hike, offsetting still moderate rates of inflation and what may be a no better than modest assessment of consumer spending. Quarterly FOMC forecasts will be updated and Jerome Powell will give his second quarterly press conference.

Thursday

Initial Jobless Claims for June 9 week

Consensus Forecast: 224,000

Consensus Range: 217,000 to 230,000

Initial claims are expected to come in at 224,000 in the June 9 week vs 222,000 in the prior week. Low readings in this report are consistent with strong demand for labor.

Retail Sales for May

Consensus Forecast: 0.4%

Consensus Range: 0.1% to 0.6%

Retail Sales Ex-Autos

Consensus Forecast: 0.5%

Consensus Range: 0.3% to 0.7%

Retail Sales Ex-Autos Ex-Gas

Consensus Forecast: 0.4%

Consensus Range: 0.2% to 0.5%

Retail Sales Control Group (Ex-Food Services, Ex-Autos, Ex-Gas, Ex-Building Materials)

Consensus Forecast: 0.4%

Consensus Range: 0.3% to 0.5%

Despite a wide consensus range, strength for retail sales is the call, at a consensus gain of 0.4 percent in May with ex-auto, given slight weakness in the month's unit auto sales, showing even more strength at 0.5 percent. Ex-auto ex-gas sales are seen at a 0.4 percent gain with control group sales, which also exclude food services and building materials, also expected to rise 0.4 percent.

Import Prices for May

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

Consensus Range: 0.4% to 0.6%

Export Prices

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

Consensus Range: 0.2% to 0.6%

Import price pressures are expected to warm up in May following what was a surprisingly contained showing in April. High oil prices along with metal tariffs are the risk for import prices which forecasters see rising 0.5 percent in May following April's 0.3 percent gain. Export prices for May are seen up a moderate 0.3 percent.

Business Inventories for April

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

Consensus Range: 0.2% to 0.5%

A healthy 0.3 percent rise is the consensus for April business inventories, a build that would be in line if not too low compared to underlying sales which have been growing at a faster rate than inventories. An unexpected reading in this report, whether high or low, could affect expectations for second-quarter GDP.

Friday

Empire State Index for June

Consensus Forecast: 19.6

Consensus Range: 17.0 to 22.5

June's Empire State index is expected, at a consensus 19.6, to roughly match May's strength at 20.1. New orders have been solid and backlogs have been on the rise which point to general strength for the June report.

Industrial Production for May

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

Consensus Range: -0.6% to 0.5%        

Manufacturing Production

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

Consensus Range: -0.8% to 0.4%

Capacity Utilization Rate

Consensus Forecast: 78.0%

Consensus Range: 77.4% to 78.3%

Held down by manufacturing, industrial production is expected to rise only 0.1 percent in May. The report's manufacturing component, which dominates the weighting in this series, is also expected to inch only 0.1 percent higher in line with weakness in factory hours in the May employment report. The mining component has been showing great strength with utility output the last two reports also a positive. Pressures on capacity utilization are expected to ease 1 tenth to 78.0 percent.

Consumer Sentiment Index, Preliminary June

Consensus Forecast: 98.7

Consensus Range: 97.6 to 99.0

The consumer sentiment is expected to firm slightly to 98.7 in the preliminary reading for June vs May's already very solid 98.0. Year-ahead inflation expectations in this report have been flat.