Smith Faculty Opinion Article	September 14, 2007
By Dr. Peter Morici, Professor of International Business E-MAIL WEB SITE

Forecasts for upcoming economic data

August retail sales data released this morning confirm underlying weakness in the economy. Although retails sales were up 0.3 percent from July, these were juiced by clearance sales by car dealers. Less autos, retail sales were down 0.4 percent. That is a terrible showing.

Coupled with last weeks report that payroll jobs are now falling, these retail sales data make more certain that the Federal Reserve will cut the target federal funds rate by at least 25 basis points on September 18. A cut to 5.00 percent, or 25 basis points, is most likely.

A rate cut of 50 basis points would be overkill. A 50 basis point cut would risk repeating the aggressive and excessive interest rate cutting of 2001, which contributed to the housing bubble and current economic woes.

An interest rate cut is needed but moderation is required. The immediate benefits of moderate reductions in interest rates are near the same as sharp, panic adjustments, but those would avoid the longer-term negative effects of reigniting speculation in the housing market.

Here are my forecasts for upcoming economic data.

Week of September 17

September 18
PPI - August -0.3% 0.6
Core PPI 0.1 0.1

Net Capital Inflows - June $90b 120.9

NAHBI 19 22

Federal Funds Target 5.00 5.25

September 19
CPI - August -0.1% 0.1
Core CPI 0.2 0.2

Real Earnings 0.4% -0.1

Housing Starts - August 1.325m 1.381
Building Permits - August 1.325m 1.373

September 20
Leading Indicators - August 0.1% 0.4
Initial Jobless Claims 320k 319

Week of September 24

September 25
Consumer Confidence - Sep 104.5 105.0
Existing Home Sales - Aug 5.62 5.75

September 26
Durable Goods - August -3.0 5.9
Durable Goods Shipments -1.0 3.8

September 27
GDP Q2 - Final 4.0% 4.0
GDP Deflator 2.7% 2.7

Help Wanted Index - August 23 25

New Home Sales - August 0.770m 0.870m

September 28
Personal Income - Aug 0.3% 0.5
Per Con Expenditures 0.3% 0.4
PCE Deflator -0.1% 0.1
Core PCE Deflator 0.1% 0.1
Real Per Consumption 0.4% 0.3

Construction Spending - Aug 0.2 -0.4
Chicago PMI -September 53.0 53.8

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission. ►More Faculty Opinion Articles