The Week Ahead Canada & U.S.: U.S. CPI, Retail Sales and Consumer Sentiment

The U.S. economy will continue to struggle between slowing growth and rising inflation. According to economists and strategists, markets will focus on U.S. advance retail sales, July CPI and the University of Michigan/Reuters consumer sentiment.

U.S. markets will also receive U.S. trade balance, IBD/TIPP economic optimism, and industrial production and capacity utilization.

Canadian markets will receive second-tier data with the release of housing starts, international merchandise trade and manufacturing shipments.

Jack Bauer, fixed income strategist from Manning and Napier said he isn't expecting U.S. Treasuries to break out of the current trend. He added that the data won't change the economic picture in the U.S. The economy remains stuck between slower growth and higher inflation.

"I think we are going to stay in this range until we see more conviction of the Fed funds rate," he said. "I don't see any reasons for the Fed to hike or cut rates yet."

Gregory Habeeb, senior portfolio manager from Calvert Asset Management, said he is not expecting next week's data to provide any short-term guidance on interest rates. He added markets are misguided by paying more attention to growth than inflation concerns.

Habeeb said CPI, which came in at 5.0% is being ignored, but inflation is having a big impact on consumers. Economists expect Thursday's inflation report to show a rise of 5.1%.

"What you are seeing is a very cautious consumer and so they should be. People just don't have enough money because of food and energy prices," he said. "Rates are going to go higher the only question is when."

Looking at currency markets, traders aren't expecting next week's U.S. data to have much of an impact on the current trend in the U.S. dollar.

John Sidawi, vice-president and senior FX trader at Federated Investment Management, said they remain bullish on the greenback, but the current rally is mostly due to broad-based concerns of global weakness.

He said Friday's strong rally in the U.S. dollar was mostly due to technical factors. He added he is expecting to see a correction in the euro in the very short term.

Sidawi, said markets are focused on global economic weakness more than the U.S. He is still expecting next week's data to show a weakening economy.

"What's changed is the market is re-pricing foreign economies. It's not so much dollar strength," he said. "I think weak retail numbers could insight short-term selling but ultimately the excessive deterioration [of] fundamentals abroad will overwhelm that."

Looking at Canadian markets, George Androulidakis, director of FX at the National Bank of Canada, said he doesn't expect any of the Canadian data to help support the loonie.

He said a strong housing starts report might help stop some of the decline in the short term, but he is still expecting to see more weakness. Technical factors might also help stop the loonie's fall.

"I think markets will remember Friday's employment and next week we will see a hang-over affect," he said. "But I just don't see a lot of data saving the Canadian dollar."

All times in EDT

Monday:

Markets will receive two Canadian housing reports. The first will be July housing starts, which are expected to show 210,000 starts for the month, down from 217,800 in June. The second report to be released is the June housing price index, which is expected to rise +0.1% following a previous reading of 0.0%

8:15 CA Housing Starts July Exp: 210.0K Prior: 217.8K

8:30 CA New Housing Price Index (M/M) June Exp: 0.1% Prior: 0.0%

13:00 US Treasury to Sell $26B 3-Month Bills

13:00 US Treasury to Sell $25B 6-Month Bills

Tuesday:

Markets will be interested in U.S. and Canadian trade data. In the U.S., the trade balance is expected to show a deficit of $61.5 billion, an increase from May's $59.8 billion. Canadian international merchandise trade is expected to show a surplus of $5.8 billion up from May's surplus of 5.5 billion. The U.S. federal government will also release the July budget statement, which is expected to show a deficit of $87.0 billion up from June's deficit of $36.4 billion.

8:30 CA International Merchandise Trade June Exp: C$5.8B Prior: C$5.5B

8:30 US Trade Balance June Exp: -$61.5B Prior: -$59.8B

10:00 US IBD/TIPP Economic Optimism August Exp: 38.8 Prior: 37.4

11:30 US Treasury $26B 155-Day Cash Management Bills

13:00 US Treasury to Sell 4-Week Bills 12-Aug

14:00 US Monthly Budget Statement July Exp: -$87.0 Prior: -$36.4B

17:00 US ABC Consumer Confidence 10-Aug Prior: -49

August 12 US DOE Short-Term Mogas Outlook August Prior: 4.06K

August 12 US DOE Short-Term Nat Gas Outlook August

August 12 US DOE Short-Term Crude Outlook August Prior: +133K

August 12 US DOE Short-Term Ht Oil Outlook August Prior: +4.42K

August 12 US DOE Short-Term Diesel Outlook August Prior: +4.48K

Wednesday:

The focus of the day will be on U.S. retail sales, which are expected to decline 0.1% in July following a 0.1% rise in June. Sales less autos are expected to rise 0.5%, following a previous rise of 0.8%.

7:00 US MBA Mortgage Applications 8-Aug Prior: +2.8%

8:30 US Import Price Index (M/M) July Exp: +1.0% Prior: +2.6%

8:30 US Import Price Index (Y/Y) July Exp: +20.3% Prior: +20.5%

8:30 US Advance Retail Sales July Exp: -0.1% Prior: +0.1%

8:30 US Retail Sales Less Autos July Exp: +0.5% Prior: +0.8%

10:00 US Business Inventories June Exp: +0.5% Prior: +0.3%

10:30 US DOE U.S. Crude Oil Inventories 8-Aug Prior: +1614K

10:30 US DOE U.S. Gasoline Inventories 8-Aug Prior: -4344K

10:30 US DOE U.S. Distillate Inventory 8-Aug Prior: +2841K

10:30 US DOE U.S. Refinery Utilization 8-Aug Prior: -0.21%

Thursday:

Markets will be focused on inflation, and expect headline CPI to show an annualized rise to 5.1%, up from June's rise of 5.0%. Core CPI is expected to show a steady rise of 2.4%. Monthly core CPI is expected to rise 0.2%, slightly lower than June's rise of 0.3%.

8:30 US Consumer Price Index (M/M) July Exp: Exp: +0.4% Prior: +1.1%

8:30 US CPI Ex Food & Energy (M/M) July Exp: +0.2% Prior: +0.3%

8:30 US Consumer Price Index (Y/Y) July Exp: +5.1% Prior: +5.0%

8:30 US CPI Ex Food & Energy (Y/Y) July Exp: +2.4% Prior: +2.4%

8:30 US CPI Core Index SA July Prior: 215.526

8:30 US Consumer Price Index NSA July Prior: 218.815

8:30 US Initial Jobless Claims 9-Aug Exp: 432K Prior: +455K

8:30 US Continuing Claims 2-Aug Exp: 3340K Prior: 3311K

10:30 US EIA Natural Gas Storage Change

14:30 US Fed's Stern Speaks in Three Forks, Montana, on Financial Shock

Friday:

The week ends with markets getting a glimpse of how the U.S. consumer is feeling with the release of the University of Michigan/Reuters consumer sentiment. The consensus is for another increase in sentiment to a reading of 62.0 up from July's reading of 61.2.

Markets will also receive the first of the regional manufacturing data with the Empire State manufacturing survey, which is expected to show a reading of -4.4, slightly higher than July's reading of -4.9.

8:30 CA New Motor Vehicle Sales (M/M) June Exp: 0.0% Prior: +1.1%

8:30 CA Manufacturing Shipments (M/M) June Exp: +0.9% Prior: +2.7%

8:30 US Empire Manufacturing August Exp: -4.4 Prior: -4.9

9:00 US Net Long-term TIC Flows June Exp: $52.5 Prior: $67.0B

9:00 US Total Net TIC Flows June Prior: -$2.5B

9:15 US Industrial Production July Exp: 0.0% Prior: +0.5%

9:15 US Capacity Utilization July Exp: +79.8% Prior: +79.9%

10:00 US U. of Michigan Confidence August Preliminary Exp: 62.0 Prior: 61.2

12:30 US Chicago Fed's Evans to Speak on Economic Outlook in Illinois

By Neils Christensen and edited by Sarah Sussman