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How to Watch the Economy This Week

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After an anxious week of lackluster economic data and a plunging stock market, the week ahead promises to shed more light on the trajectory of an economy that has been on a path of slow growth.

Last week, we saw retail sales and industrial production reports that came in below expectations, as well as an increase in initial claims for unemployment insurance. The drop in U.S. stocks, which gathered speed at the end of last week, came amid a drop in Asian stocks.

This week we’ll get housing data, including housing starts on Wednesday and existing home sales on Friday. The Consumer Price Index for December will be released on Wednesday, although that’s likely to be a quiet report, said Bob Hughes, senior research fellow at the American Institute for Economic Research. And the Chicago Fed will release its National Activity Index on Friday, which is always useful in taking a broader look at the economy.

But the stock market is most likely to respond to the many U.S. corporate earnings reports that will be coming out in the next few weeks, Hughes said. There are some big companies reporting this week, including financial services firms like Morgan Stanley and Charles Schwab, as well as Verizon, Netflix and IBM.

Those companies that have already filed fourth-quarter earnings reports have largely beaten profit growth expectations, although revenues have been a bit soft, Hughes said.

We’ll also keep our eye on China. Notably, that country reported a reassuring gross domestic product number today.  The number was a bit below the government’s target but not as bad as some investors feared, Hughes said.

“Along with our business-cycle conditions model, we continue to look at all the data with the same perspective, the same analytical framework. We’re looking for that weakness to spread, or hopefully not spread,” before we can consider a change in the U.S. economy’s trajectory, Hughes said.

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