As Americans try to thaw out from a too bitter winter, economists are wondering what might be done for retailers who were unable to heat up buying activity. The holiday period was so cold and gloomy that it froze consumers’ wallets. The glacial sales pace also prompted many stores to shut their doors, stirring hand-wringing reports that the country was tumbling into recession. This brings us to Tuesday’s government report on January retail sales. Economist Lynn Reaser expects it to show a warm-up of 0.5 percent, or, when car sales are excluded, 0.4 percent. That’s up from a tiny overall advance of 0.1 percent in December. “Retailers generally showed better-than-expected results last month and auto sales picked up very substantially,” said Reaser, of Banc of America Capital Management in St. Louis. “The question is whether we will see a drop in consumer confidence, which would create a second stage of the current slowdown. Otherwise, this report would seem to be good news, and means a boost for upcoming corporate profits.”
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HOUSING STARTS
COOLED BY THE `R’ WORD
One area that hasn’t suffered much from the winter cooldown is construction, which remains at robust levels. Watch for Friday’s report of January housing starts to show a tiny drop, to an annual rate of 1.55 million units from 1.58 million a month earlier. That’s the prediction of economist Don Hilber, who believes Americans are hearing too much of the “r” word–recession. “Jobs and incomes keep on growing, but they will have to keep doing so or else confidence will erode further,” said Hilber, of Wells Fargo & Co. in Minneapolis. He also is watching Friday’s report on the January producer price index; he expects a sizable gain of 0.3 percent, up from no gain a month earlier. But when food and energy costs are excluded, Hilber expects the increase to be only 0.1 percent.
BUSINESS INVENTORIES
UNSOLD GOODS ON THE RISE
A long list of reports due out this week includes December business inventories Wednesday and January industrial production Friday. The most watched number may well be business inventories: Stockpiles of unsold goods were up 0.5 percent in November, to $1.22 trillion, on top of a 0.7 percent gain a month earlier. As merchandise stacks up, it can lead to production cutbacks and layoffs.
EQUITIES
GREENSPAN HOLDS THE KEY
The stock market is awaiting Tuesday’s report to Congress from Federal Reserve Chairman Alan Greenspan, who will offer his twice-a-year assessment of the economy and interest rates. The Fed’s two rate cuts in January are having some effect, but investors are clamoring for quick results. Flossmoor investment adviser Richard Evans says the Fed’s recipe calls for patience. He says major groups of stocks have picked up a lot of technical strength, especially since the Fed began its lower-rate regimen Jan. 3. The exception: computer stocks, which remain precarious. Evans is telling subscribers to his Renaissance Report newsletter that the Dow Jones transportation index, which he tracks, “is giving the all-clear sign.” And as utilities and other groups of stocks move higher, he said, “there is plenty of reason to take an increasingly bullish posture.”