The focus is on the United States for the coming week with a Fed meeting and a slew of economic data. As well, the heavy flow of corporate earnings on both sides of the border should capture some attention.

Canadian GDP update due Friday

In Canada, wholesale trade figures for November are due out on Monday, followed by retail sales on Tuesday. Industrial prices are due on Thursday. RBC Financial says that the biggest release of the week will come on Friday with a November update on real gross domestic product, “that will provide data on how the economy grew in two out of three months on the quarter”.

BMO Nesbitt Burns expects the GDP report to cast doubt on the Bank of Canada’s forecast for Q4. “The Canadian economy looks to have posted a second-straight modest expansion in November. Export volumes rose in the month, and employment was again surprisingly strong, but these positives will be largely offset by weakness in manufacturing shipments and a sharp drop in housing starts,” it says. “The headline on retail trade is expected to show a decline in November. As a result of the sluggish expansion in October and November, real GDP will struggle to hit the Bank of Canada’s expected growth of about 4% in Q4, reinforcing the bias to ease.” It says that retail sales are expected to drop by 0.3% in November, as auto sales fell sharply over the past few months.

“In Canada, non-auto retailers likely fared better than vehicle sales in November, assuming some of the job gains translated into spending activity. We’ll need that non-auto retailing pick-up, and the associated monthly rise in GDP, if we’re going to get the 4% growth rate the Bank of Canada has assumed for Q4,” says CIBC World Markets. “December industrial prices might have rebounded a bit as the Canadian dollar rally took a pause, and some intermediate goods prices took off in US dollar terms.”

Nesbitt says that the Bank of Canada will view the retail report as additional justification that further rate cuts are needed to boost Canadian domestic demand to offset the slowdown in net exports.

U.S. GDP, consumer confidence numbers

“Next week’s releases will be a beehive of activity for U.S. markets,” says RBC. “By far the biggest release of the week will come with Friday’s advance GDP numbers for the fourth quarter. The second biggest development will be Wednesday’s FOMC rate announcement.”

It also notes that updates on the Conference Board’s consumer confidence index (due on Tuesday) and the University of Michigan’s consumer sentiment survey (released on Friday) will also be closely watched.

Durable goods orders for December come out on Wednesday, as well as new and existing home sales for the same month. Initial unemployment claims is slated for Thursday,too, and the Chicago purchasing managers’ index is out on Friday.

TD Bank says that next week’s Fed meeting is almost universally expected to result in steady policy. “We see no prospect for the Fed to begin raising interest rates before the August 10th FOMC meeting, and increasingly, see a risk that the start date for the onset of the next tightening cycle could be even later,” it says.

CIBC agrees that the FOMC will keep rates on hold and, “once again, it will remind markets of its willingness to let the economy run for a considerable period before stepping in with rate hikes. That will be well-justified in the minimal inflation likely to show up in the GDP and consumer price deflators in the Q4 accounts.”

Nesbitt cautions that it’s possible that the Fed will move sooner than the market now expects. “But it’s unlikely that the Fed will put anything in the upcoming statement that will alert the markets to an imminent change in their policy stance. Thus, for now, don’t bet against the Fed is the better part of wisdom.”

It says that it is looking for a strong fourth quarter GDP reading, it expects an above-consensus 6% result. “Notwithstanding GDP looming on the horizon, it will probably be the more timely January data that dominate this week’s economic news, along with corporate earnings announcements, of course. The Conference Board’s consumer confidence figures will be closely watched to see if they confirm the eye-popping pickup registered in the first-half January Michigan sentiment survey. Initial claims are in a sharply declining trend, which is boosting hopes for the employment situation.”