US financial markets will focus on inflation data in the week ahead, with key reports including the Producer Price Index (PPI) on Tuesday and the Consumer Price Index (CPI) on Wednesday, which will provide fresh clues on inflation’s trajectory as the Federal Reserve weighs its next move.
Retail sales data on Thursday and housing market figures on Friday will offer insights into economic momentum for the fourth quarter.
Tuesday: PPI report and Fed speeches
On Tuesday, the focus will be on the release of the Producer Price Index (PPI), which is expected to show a 0.4% increase in the headline figure and a 0.2% gain in the core PPI. Attention will be on specific PPI categories, such as healthcare services, airfares, and portfolio management, which feed into the core Personal Consumption Expenditures (PCE) deflator – the Federal Reserve’s preferred inflation measure.
Also on Tuesday, Kansas City Fed President Schmid will deliver remarks, providing additional insights ahead of the week’s inflation data.
Wednesday: CPI report and key Fed appearances
Wednesday brings the highly anticipated Consumer Price Index (CPI) report. Deutsche Bank analysts are forecasting a 0.4% gain in headline CPI and a 0.23% increase in core CPI. If these projections hold, the year-over-year growth for headline CPI will rise to 2.9%, while core CPI will remain steady at 3.3%. Rent prices are expected to contribute to the overall CPI increase, with primary rents forecasted to rise by 0.29% and owners' equivalent rents up by 0.34%.
Following the CPI report, New York Fed President Williams will deliver a keynote address, and Minneapolis Fed President Kashkari will participate in a fireside chat. These speeches are expected to provide the market with valuable insights into the Fed’s view on inflation and economic conditions.
Additionally, Richmond Fed President Barkin and Chicago Fed President Goolsbee will speak at regional events, offering further commentary on the economic outlook.
Thursday: Retail sales and manufacturing data
Thursday’s economic data will include retail sales figures, which Deutsche Bank expects to show solid gains. Headline retail sales are forecast to rise by 0.6%, with a 0.5% increase in sales excluding autos. The data will provide insight into consumer spending, with particular attention on the performance of nonstore retailers, which posted strong gains in December 2023.
In addition, Empire State and Philly Fed surveys will give a glimpse into manufacturing sentiment. Although sentiment has been mixed between the two surveys, both are expected to show stronger future expectations for capital expenditures, which could signal increased investment in 2025.
Friday: Housing data and industrial production
On Friday, the data focus shifts to housing starts and building permits, which will offer insight into residential investment. Deutsche Bank projects housing starts to reach 1.3 million and building permits to come in at 1.45 million. These figures will help inform growth estimates for the fourth quarter.
The industrial production report will also be released on Friday, with a 0.1% increase in production expected, alongside a slight rise in capacity utilization to 77%.