Stronger-than-expected increases in this week’s industrial production index and retail sales could lead to a sell-off in the bond market, according to Richard Yamarone, chief economist at Argus Research, an independent equity research firm.
Yamarone forecasts another 0.1% increase following August’s 0.1% rise. Kevin Harris, chief economist at Informa Global Markets, predicts a 0.6% jump. Consensus has the index growing by .4%.
“If you were to see anything above a 0.5% increase, like a 1% gain, that could result in a strong sell-off in the bond market,” Yamarone said. However, he said the index is more likely to show a weaker increase.
While neither the industrial production index nor retail sales are as key to the Fed Funds rate as last Friday’s nonfarm payroll numbers, the industrial production index factors into the Federal Reserve’s decision to raise or lower rates, Harris said.
Overall, retail sales will nudge up 0.4%, while the figure excluding auto sales will grow .3%, he predicted. Consensus put the rise at 0.6% for overall sales and 0.4% excluding auto sales. The economist said the bond market might rally if retail sales had zero growth or showed a contraction.
“The consumer is slowing down a little bit, but we’re far from a recession,” he said.
