The U.S. October CPI data, set to be released this Wednesday, is drawing significant attention from the market. The general market consensus is that the year-on-year and month-on-month growth of core CPI will remain consistent with September, while the overall CPI is likely to increase by 0.2% month-on-month for the fourth consecutive month. The year-on-year increase might accelerate for the first time since March. Analysts believe that despite some easing of inflationary pressures, the current level still poses significant challenges to reaching the Federal Reserve's target. The "last mile" of achieving inflation goals is proving to be quite difficult.
Data indicate that, excluding volatile items like energy and food, core goods prices might rise further in October, mainly due to increased consumer demand for automobiles and parts following the hurricane. Additionally, the hurricane's impact has also boosted demand for hotel accommodations, keeping service prices high. Analysts point out that these pandemic-era price distortions are gradually returning to normal, albeit slowly.
In a speech last week, Federal Reserve officials noted progress in controlling inflation, while the U.S. economy remains robust, yet the Federal Reserve has not fully met its goals. Although the growth in the economy and productivity might result in lower-than-expected rate cuts in the coming months, there may still be new policy adjustments in December. Markets predict that both October CPI and PPI will rise, potentially increasing long-term yields and further restraining the economy. Additionally, the unemployment rate is expected to continue climbing, reaching 4.5% by the end of the year.
The October PPI data, scheduled for release on Thursday, is expected to rebound after stagnation in September. Retail sales data, due on Friday, are also anticipated to show considerable growth. Moreover, the Federal Reserve will release the latest Senior Loan Officer Survey this week, which is expected to reveal the economic outlook and credit demand.
On the corporate earnings front, investors will focus on the performances of Home Depot and Disney. Home Depot will report its third-quarter earnings before the U.S. market opens on Tuesday, with expectations for sales of $39.24 billion and earnings per share of $3.64. Home Depot's outlook on the real estate market is of particular interest, especially against the backdrop of rising long-term Treasury yields leading to higher mortgage rates, a factor that offsets some of the growth in demand for building and renovation products. Additionally, insurance claims and homeowners' rebuilding needs from recent hurricanes may also boost Home Depot's sales.
Disney will release its earnings on Thursday, with its experiences division (including theme parks, hotels, cruises, and peripheral products) under particular scrutiny. Recently affected by hurricanes, Florida's theme parks were temporarily closed, and consumer responses to inflation have weakened business performance. However, as profitability gradually improves, the company's direct-to-consumer business is expected to improve. The market forecasts Disney's fourth-quarter sales to be $22.44 billion with earnings per share of $1.10.
