U.S. Economic Calendar Event Update – Jan 16

These are the U.S. economic calendar events for Wednesday, January 16, 2013. All times are EST.

MBA Purchase Index for the week ending on 01/12 are scheduled to be released at 7:00 AM. The prior period for MBA Purchase Index had a result of 11.7%. This event has a low effect on US markets.

Core CPI for Dec are scheduled to be released at 8:30 AM. Analysts are estimating a result of 0.1%. The prior period for Core CPI had a result of 0.1%. This event has a low effect on US markets.

CPI for Dec are scheduled to be released at 8:30 AM. The prior period for CPI had a result of -0.3%. This event has a low effect on US markets.

Net Long-term TIC Flows for Nov are scheduled to be released at 9:00 AM. The prior period for Net Long-term TIC Flows had a result of $1.3. This event has a low effect on US markets.

Capacity Utilization for Dec are scheduled to be released at 9:15 AM. Analysts are estimating a result of 78.5%. The prior period for Capacity Utilization had a result of 78.4%. This event has a moderate effect on US markets.

Industrial Production for Dec are scheduled to be released at 9:15 AM. Analysts are estimating a result of 0.2%. The prior period for Industrial Production had a result of 1.1%. This event has a low effect on US markets.

NAHB Housing Market Index for Jan are scheduled to be released at 10:00 AM. Analysts are estimating a result of 48. The prior period for NAHB Housing Market Index had a result of 47. This event has a low effect on US markets.

Crude Inventories for the week ending on 01/12 are scheduled to be released at 10:30 AM. The prior period for Crude Inventories had a result of 1.314. This event has a low effect on US markets.

Fed Beige Book for Jan are scheduled to be released at 2:00 PM. This event has a low effect on US markets.

At the release of important events, US equity markets (INDEXSP:.INX) can make major moves. Be sure to keep an eye on S&P (NYSEARCA:SPY), Nasdaq (NYSEARCA:QQQ) and Dow Jones (NYSEARCA:DIA) at the time of announcements.

Here is some more information about the events discussion in this article.

MBA Purchase Index: Gauges demand for mortgage application in the US . Tracking new home mortgages and refinances, MBA Mortgage Applications Survey serves at a current indicator for the US housing market. Growth in mortgages suggests a healthy housing market. Due to the multiplier effect housing has on the rest of the economy, rising activity suggests increased household income and economic expansion. The headline figure is the weekly percentage change in the MBA Mortgage Applications figure. Among the various indices measured in the survey, the purchase index and refinancing index most accurately reflect where the housing market is headed. The purchasing index measures the change in existing home sales in all mortgage applications, while the refinance index measures the mortgage refinancing activity in all mortgage applications.

Core CPI: CPI assesses changes in the cost of living by measuring changes consumer pay for a set of items. CPI serves as the headline figure for inflation. Simply put, inflation reflects a decline in the purchasing power of the dollar, where each dollar buys fewer goods and services. In terms of measuring inflation, CPI is the most obvious way to quantify changes in purchasing power. The report tracks changes in the price of a basket of goods and services that a typical American household might purchase. An increase in the Consumer Price Index indicates that it takes more dollars to purchase the same set basket of basic consumer items.

CPI: The Consumer Price Index is one of the leading economic gauges to measure the pace of inflation. Simply put, CPI measures the acceleration of price in a fixed basket of goods and services. Higher CPI indicates that prices of the basket as a whole have increased and as such, it costs more of the local currency to buy the same basket of goods. CPI is also broken down to a core level which strips out the volatile components of the index, which usually include food and energy, but this various by country. Usually, central banks pay far greater importance to the core numbers than the headline numbers. Excessive inflation will induce a central bank to consider raising interest rates while falling inflation would give them the flexibility to lower interest rates.

Net Long-term TIC Flows: Net Long-term TIC flows measures the capital flow into U.S. denominated assets (‘TIC’ stands for Treasury International Capital). It summarizes the flow of stocks, bonds, and money market funds to and from the United States. The number we report is the difference in value between American purchases of foreign securities and foreign purchases of American securities. In short, it measures the demand for U.S. investments and dollar. A positive figure suggests there is demand for American assets compared to foreign assets. The key is for this figure to meet the trade deficit as demand for assets offsets the trade shortfall. The market closely follows the purchases by China and Japan as they represent the biggest customers for U.S. assets. Caribbean central banks are also followed as they tend to represent hedge funds that are incorporated in the territories.

Capacity Utilization: The Capacity Utilization released by the Federal Reserve Board is the percentage of the US production capacity which is actually used over the short-time period. It is indicative of overall growth and demand in the U.S. economy.

Industrial Production: The index of Industrial Production is a fixed-weight measure of the physical output of the nation’s factories, mines, and utilities. Manufacturing production, the largest component of the total, can be accurately predicted using total manufacturing hours worked from the employment report. One of the bigger wildcards in this report is utility production, which can be quite volatile due to swings in the weather. Severe hot or cold spells can boost production as increased heating/cooling needs drive utility production up.

In addition to production, this monthly report also provides a measure of capacity utilization. Though the rate of capacity utilization is seen as a critical gauge of the slack available in the economy, the market does not completely trust this measure. Capacity is very difficult to measure, and the Fed essentially assumes that growth in capacity in any given year follows a straight line. One can therefore predict the capacity utilization rate quite accurately based on the assumption for production growth. The 85% mark is seen as a key barrier over which inflationary pressures are generated, but given revisions to these data and the difficulties with capacity measurement, the 85% mark should be viewed cautiously. It would be appropriate to look for corroborating inflation indications from commodity prices and vendor deliveries.

NAHB Housing Market Index: A timely gauge of home sales and expectations for future home building. Based on a small sample of homebuilders, the Housing Market Index is a timely indicator of future US home sales. However, as the index is not as comprehensive as formal housing reports like new home sales or MBA mortgage applications, the index acts more like a supplemental indicator for predicting housing trends. As such, the NAHB Housing Market Index is still able to provide general insight to where the housing market is heading. Given that new home sales reflect ‘big ticket’ items that require construction and investment, the housing market is often viewed as an indicator of the direction of the economy as a whole. Growth in the housing market will spur subsequent spending, generating demand for goods and services and the employees who provide them. The report headline is expressed in percentage change from the previous month.

Crude Inventories: Measure of inventories of crude oil stored for future use. The figure relies on the Energy Information Administration’s Monthly Crude Oil Report which surveys companies that store 500 or more barrels of crude oil. Because companies with smaller stores are excluded, the figure systematically underestimates actual crude oil stores. Nonetheless, the report is significant as changes in crude oil inventories provide insight into oil demand and prices. A significant decrease in inventories suggests the supply of oil is possibly strained, which puts upward pressure on oil prices. Any increase in oil prices will act as an inflationary pressure as increased oil prices are fed through the economy. But because any affects of Oil Stocks would take some time to feed through the economy, the report typically does not affect the market. The figure is reported monthly, either in thousands of barrels per month or as a percentage change from the previous month.

Fed Beige Book: Report on current economic conditions in each of the 12 Federal Reserve districts covering the entire US. Regional Banks in the Federal Reserve System gather anecdotal information based on surveys of executives, economist and market participants. The Beige Book summarizes this data into a relatively short document, giving a picture of economic trends and challenges faced by different parts of the nation. In addition to providing useful information on the economy, the report is also a window into how FOMC members may vote at the next interest rate policy meeting. Because each report is based on anecdotal information as much as statistics, it is subjective and may reflect opinions of district governors. As the only comprehensive report made available to the public, the Beige Book provides a rare opportunity for markets to better understand the Federal Reserve and its views on the economy.

Alex Fredricks

Alex Fredricks

Alex Fredricks has a degree in business and is an avid day-trader. Alex's experience and love for the game of the markets is shown not only in his posts, but the post he helps edit for other authors on our staff.