What looked for a while like a month-early onslaught by the gales of November has eased to a friendly breeze in financial markets. The reason: Worries about inflation were calmed Friday by a mild report on third-quarter economic growth. However, the light wind could take on a more sinister aspect this week. In particular, storm flags could be flying Friday, when the Labor Department reports the nation’s unemployment rate for October. If joblessness shows a steep drop, or payrolls expand markedly, more troubles could ensue for stocks and bonds. Economist Brian Wesbury believes the report will show that the unemployment rate held steady at 5.9 percent as payrolls grew by 265,000 for the month. That’s slightly faster expansion than most analysts are expecting, but “the surprises continue to be on the upside. The economy is a bit more buoyant than people expected,” says Wesbury, chief economist for Griffin, Kubik, Stephens & Thompson, a Chicago investment firm.
CONSUMER WALLETS
An outpouring of tricks and treats, in the form of fresh economic data, begins Monday, with reports on personal income and spending for September. In August, incomes rose only 0.4 percent, but consumption spending soared 0.9 percent. While that stirred some talk of inflation, skeptics said there is no way consumers can continue tossing around money at such a fast pace.
A LOOK AT MANUFACTURING
The first intense scrutiny of the October economy occurs Tuesday, when the National Association of Purchasing Management provides its monthly report on the nation’s manufacturing sector. The group’s index stood at a vigorous 58.2 points in September. (Anything above 50 is seen as a sign the economy is growing.) Concern has been centered on a lack of spare capacity in factories; a reading of the purchasing managers’ index above 60 could spook financial markets and send interest rates soaring. Also out Tuesday: construction spending for September, which follows a dip of 0.2 percent in August.
MORE BAROMETERS
The government’s chief forecasting gauge, the index of leading economic indicators for September, will be rolled out Wednesday. For August, the index jumped 0.6 percent, the biggest advance since March and its 11th gain in the last 13 reports. Also Wednesday, look for manufacturers’ orders and shipments and the “Beige Book” report, a regional look at the economy that provides key information for the Federal Reserve.
SPENDING SPREE
Although some analysts expect Thursday’s report on chain-store sales to display a bit of weakness, especially in the category of apparel, most have been astonished this year by consumers’ eagerness to unzip their wallets. Economist Sun Won Sohn offers this observation: “Consumer loan rates are lagging money-market rates, explaining, in part, why consumer spending has been so robust.” Sohn, chief economist for Norwest Corp. in Minneapolis, sees retail sales softening, but not until next year. Also Thurday, look for statistics on September new-home sales and October vehicle sales.
EARNINGS STRAGGLERS
Favorable surprises have been the rule for third-quarter corporate profits, but this week will bring the stragglers. Expect at least a few downside shocks.
