WASHINGTON (AFX) - US economic indicators to be released in the coming week will show that industrial production is poised to break out of its sixteen month downturn, and that retail sales gained fresh impetus from increased consumer demand in February, economists said. All of the economists surveyed for the coming week's outlook said that industrial production broke into positive territory in February for the first time since Sept 2000, aside from a slight gain in July of last year.
They said the forecast rise in industrial output, which is largely due to a turn in the inventory cycle, indicates that the manufacturing recession is drawing to a close, and that growth is returning to the sector as the wider economy also begins to reflect a more positive picture.
"Of the past sixteen months (of industrial output), fifteen of them were declines, so the fact that we have this increase forecasted is compelling. It adds to the growing weight of evidence that we are now in a recovery," said Dana Saporta, a US economist at Stone & McCarthy Research Associates in Princeton, NJ. Other economists also agreed that industrial output appears to be breaking out of its long slump as demand improves and factories and plants begin to ramp up their production.
"Manufacturing growth resumed in February following a 16 month skid... re-accelerating productivity growth in manufacturing ensures that initial production gains can be accomplished even as aggregate hours worked continue to slowly recede," according to Bank of America Securities US economist Michael Levy. Expected gains in utility and mining production are seen boosting the return of industrial output to positive territory. Saporta added that the manufacturing data from Friday's employment report has also substantiated expectations that industrial output will record a return to growth in February.
"The manufacturing hours data from today's (Friday's) employment report is one of the factors... it does reflect the fact that the factory work week has increased a little bit, and you also had productivity in manufacturing picking up too," she added. "If you see (industrial production) up slightly in February its painting a picture of a sector that is turning or has turned already," said Mike Moran, chief US economist at Daiwa Securities America in New York.
Aside from the manufacturing data, economists will also be focusing on the latest retail sales report which is expected to show that sales bounced back into positive territory in February following January's decline. The rise in February vehicle sales, which came in stronger than expected, will also boost overall retail sales. Tim McGee, chief US economist at Tokai Bank Ltd in New York, said he will be focusing on retail sales in the coming week, but that he will also be watching to see if weekly jobless claims dip as that would also indicate that employment growth is getting back on track. Following are the consensus forecasts of Wall Street economists for data to be released next week:
JANUARY WHOLESALE INVENTORIES, Monday (10.00 am): Economists expect wholesale inventories to decline by a seasonally adjusted 0.4 pct in January after they fell 0.6 pct in December. If inventories fall in January, it would mark an eighth straight monthly decline.
FEBRUARY RETAIL SALES, Wednesday (8.30 am): Economists forecast that retail sales increased 0.8 pct in February after declining 0.2 pct in January.
Excluding autos, February retail sales are seen rising 0.5 pct after they increased 1.2 pct in January.
JANUARY BUSINESS INVENTORIES, Thursday (8.30 am): Economists said that business inventories declined 0.3 pct in January after they fell 0.4 pct in December. Another fall in inventories would mark the twelfth such consecutive monthly decline.
Business sales are forecast to rise 0.8 pct in January after remaining unchanged in December.
Q4 CURRENT ACCOUNT, Thursday (8.30 am): Economists said that the fourth quarter current account deficit widened to 102.1 bln usd from 95.0 bln in the third quarter, compared with a forecast Q4 deficit of 115.3 bln in the initial estimate.
FEBRUARY IMPORT, EXPORT PRICE INDEX, Thursday (8.30 am): Economists expect import prices to rise 0.1 pct in February after they rose 0.4 pct in January while export prices are seen remaining unchanged in February following a 0.1 pct decline in January.
WEEKLY JOBLESS CLAIMS, Thursday (8.30 am): Forecasts indicate that initial claims for regular state unemployment benefits fell by 3,000 to a seasonally adjusted 373,000 for the week ended March 9 after claims fell 5,000 to 376,000 in the prior week.
FEBRUARY PRODUCER PRICE INDEX, Friday (10.00 am): Economists forecast that producer prices rose 0.2 pct in February after increasing 0.1 pct in January. The core rate, which excludes volatile food and energy prices, is seen rising 0.1 pct after it fell 0.1 pct in January.
FEBRUARY INDUSTRIAL PRODUCTION, Friday (9.15 am): Economists said industrial output increased 0.3 pct in February after falling 0.1 pct in January.
A rise in industrial output in February would mark the first gain in production since Sept 2000, apart from a small rise in July 2001. Utilisation is seen rising to 74.4 pct of capacity in February from 74.2 pct in January.
UNIVERSITY OF MICHIGAN MARCH CONSUMER SENTIMENT INDEX, Friday (10.00 am): Forecasts indicate that the University of Michigan's consumer sentiment index rose to 92.5 in the preliminary March reading after if fell slightly to 90.7 in the final February reading.