REPORT
By Ovunc Kutlu & Gulbin Yildirim
US letter, week beginning August 15

The U.S. had a slow data release calendar last week even though a few market moving indicators were announced.

July retail sales came in flat suggesting American consumers started the third quarter on a softer note. The market consensus on sales was an increase of 0.4 percent.

In the same period, Producer Price Index (PPI) fell 0.4 percent marking the fastest decline in nearly a year.

The PPI measures prices at the producer level before they are passed along to final consumers. A portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in the coming months.

According to other official releases, weekly jobless claims rose 1K to 269K, slightly above expectations. Wholesale inventories also exceeded expectations by a 0.3 percent rise in June.

- Oil prices pulled down estimates

Last Tuesday, the U.S. Energy Information Administration (EIA) revised down its oil price forecast for this year and the next, according to its monthly Short-Term Energy Outlook report for August. 

The price of the international benchmark Brent crude was revised down to $41.60 per barrel for 2016, from the anticipated $43.73 a barrel in last month's report.

In addition, the price of the American benchmark West Texas Intermediate was revised down to $41.16 a barrel, from $43.57 per barrel for this year.

In addition, for 2017, the prices of both benchmarks were revised down to $51.58 per barrel, from $52.15 a barrel.

Nevertheless, oil prices finished the week with gains and U.S. markets also closed the week higher despite the daily losses on Monday and Wednesday.

- Trump promises tax cuts

The economıc speeches by the presidential candidates were among other important developments.

Republican presidential nominee Donald Trump on Monday unveiled his plan to foster economic growth, leaning heavily on tax cuts and American exceptionalism as he seeks to correct his campaign’s floundering course.

Speaking in Detroit, Trump said he would simplify America’s convoluted tax code, cutting the number of tax brackets from seven to three “and dramatically streamline the process.” Americans in those brackets would be taxed at 12 percent, 25 percent and 33 percent. 

Trump further suggested that businesses should not have to pay more than 15 percent of income -- less than half of the current 35 percent corporate tax rate.

Democratic presidential nominee Hillary Clinton on Thursday blasted her Republican rival’s visions and policies in the same city.

She called the Republican nominee's plan to give tax breaks to Wall Street the "Trump loophole" and said his idea to give trillions of dollars in tax cuts to big corporations and millionaires would destroy the country's national debt and cause massive cuts in education, health care and environmental protection.

The Democratic candidate also shared her family's 2015 tax return on Friday in an effort to pressure Trump, who has been refusing to share his tax returns.

- FOMC Minutes, CPI, industrial production

This week, the markets will closely follow the Federal Open Market Committee (FOMC) minutes for the July meeting. The minutes carry important weight in gauging the stance of the FOMC members regarding the timing of a next interest rate hike.

In addition, the consumer price index and industrial production for the month of July are among this week's important economic developments.

15 Aug,2016

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