This week’s key manufacturing, construction, and labor releases
This week, several key economic data releases from both demand-side and supply-side variables will be issued. The releases will cover manufacturing, retail, automobiles, and employment. Most of the focus this week will be on the key releases of the Purchasing Managers Index (or PMI), as well as job creation statistics, which are key to determining the future course of monetary policy. Construction spending, which will release on Tuesday, will also play a role in determining whether the boom in the housing sector is set to continue.
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Demand-side indicators to be released this week
- Retail sales indices represented by the ICSC-Goldman Sachs Store Sales Index and the Johnson Redbook Index, both due to release on Tuesday
- Gallup’s Economic Confidence Index (or ECI), also due on Tuesday
- Auto sales for March, due to release on Tuesday, issued by the Bureau of Economic Analysis
- The weekly Bloomberg Consumer Comfort Index, which will release on Thursday
- Employment indicators: Challenger job report and the ADP Job Report on Wednesday, Gallup US Payroll to Population and initial jobless claims on Thursday, and non-farm payrolls on Friday
Supply-side releases slated for this week
- The Texas Manufacturing Outlook Survey report, which will be released by the Dallas Fed on Monday
- Purchasing Managers Indices: Chicago PMI on Monday, the Institute of Supply Management’s PMI for both manufacturing and services on Monday and Thursday, respectively, and the HSBC-Markit Intelligence PMI for manufacturing and for services on Monday and Thursday, respectively
- Construction spending figures for February will be released by the US Census Bureau on Tuesday
- Factory orders to be issued by the U.S. Census Bureau on Wednesday.
This week also marks the beginning of a new quarter, which, for many, will be a relief due to the ambiguity of readings in the last quarter, when data became complicated due to weather conditions.
Other factors remaining constant, an increase in both demand-side and supply-side related activity would imply the overall economy is expanding. An increase in production and new orders would especially benefit manufacturing companies, as it would directly translate to top-line growth. ETFs with exposure to the industrial sector include the State Street Industrial Select Sector SPDR (XLI). An increase in production and new orders would also significantly benefit companies in the transportation and logistics businesses due to the trickle-down effect that increased manufacturing activity generates. The top holdings in XLI include railroad companies such as Union Pacific Corp. (UNP) and United Parcel Service Inc. (UPS).
An increase in the manufacturing PMI would also imply the economy is recovering, and, other things remaining constant, interest rates could increase faster than expected. The Fed at its recent FOMC meeting has indicated that it will raise the base rate sometime between Q2 and Q4 2015. If economic data releases indicate a faster-than-expected recovery, this would push the rate increase nearer. One way investors can benefit from higher rates is by investing in floating-rate fixed income ETFs like the VanEck Vectors Investment Grade Floating Rate ETF (FLTR) and the SPDR Barclays Cap Investment Grade Floating Rate ETF (FLRN). As interest rates rise, these ETFs will benefit, as their interest rates aren’t fixed but benchmarked to a reference rate and reset at periodic intervals.