Retail Sales due at 8:30 AM. Michigan Confidence due at 10:00

US Retail Sales for the month of November will be released at 8:30 AM. The expectation is for a gain of +0.6% vs a gain of +1.4% last month.  The ex Auto release is expected to show a gain of +0.4% vs +0.2% last month.  The Ex Auto figure has been up for 3 straight months.  A gain this month would be the longest string since July 2008.  The consumer accounts for near 70% of US GDP.  

Yesterday, the Fed announced that Net Household Wealth increased for the 2nd quarter in a row.  This was after 8 quarters of declines.  The gain in wealth is positive for consumer confidence and potentially spending.  The question is was the decline too damaging.  The decline from the top to bottom cut 26% of household wealth and given the leverage that consumers accumulated the decline was likely magnified.    This is the rub and will be what determines the spending trends going forward.  If the consumer is happy with the increased wealth, confident with employment, perhaps spending is increased. If the consumer is focuses on the overall decline in wealth still and looks at the gains as just a partial pay back or if the decline in wealth has done too much damage to the leveraged balance sheet of the consumer (ie. foreclosure is more of a worry), then the spending will remain depressed. 

At 10:00 we will be getting a measure of confidence when the Univ of Michigan Preliminary Confidence estimate is released for the month of December.  Last month the  measure fell for the second consecutive month to 67.4.  The high off the lows reached 73.5.  The expectation this month is for a rise to 68.8.  Confidence spurs spending.   Keeping the confidence moving higher is paramount for a more firm economic foundation that adds new jobs and sustains growth.

Also due for release at 8:30 will be the US Import Price Index for November.  This measure is expected to show a gain of 1.2% for the month on month and +2.9% YoY.  Over the next few months this measure will show sharp gains YoY as the effects of sharply lower values from last year fall out of the equation. In November and December last year price on MoM basis fell by -7.4% and -16.9% largely on the back of plunging oil prices.   This month the YoY is going from -5.7% to +2.9 largely reflecting the November 2008 effect.  When-16.9% falls out next month, the YoY index will soar even higher.  This inflation is partly influenced by the declining US dollar.   A lower dollar increases import prices all things being equal.  If the US is dependent on that good, that is bad. If their are domestic producers who can be a replacement supplier, it may not be so bad.    It will be interesting to see if the market starts to pay more attention to the effects of import prices going forward as the true numbers (less effected by the soaring and plunging oil prices) start to filter through the numbers.

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