Next week promises a light data schedule in Canada. However, a holiday-shortened U.S. week will be chock full of economic news.

In Canada, there are just two data releases and a speech from Bank of Canada Governor David Dodge. Dodge speaks on Tuesday. Securities trade data is out on Wednesday, while the consumer price index for January is out on Thursday.

CIBC World Markets expects inflation readings to stay muted. “A big drop in year-on-year inflation measures will underscore the reasons why Governor Dodge can afford to be generous in providing interest rate support to the Canadian economy,” it says. “The Bank of Canada is resigned to the fact that, wherever it settles, the Canadian dollar will be a lot stronger than it was in 2001-02.”

Canadian headline and core inflation is set for a steep decline in the January readings, according to BMO Nesbitt Burns Inc. Although the drop will largely come as a result of the fact that a big increase from a year ago drops out of the calculation. “Both headline and core inflation are expected to head even lower in next month’s report, before bottoming out and beginning to gradually move higher through the rest of 2004,” Nesbitt notes.

The only other event of note in Canada next week is the start of provincial budget season. B.C. is set to lead the way on Tuesday. “The province has been aiming to balance the budget by fiscal year 2004/2005, versus the latest estimate of a $2.3 billion shortfall in the fiscal year ending in March,” Nesbitt says. “The province is clawing its way back from a large deficit and sticking to the plan laid out in the 2002 budget to restore fiscal health. Despite last year’s economic slowdown, the plan appears on track.”

In the U.S., traders will be off on Monday for the President’s Day holiday. That means packing a week’s worth of data into just four days. Industrial production numbers are due on Tuesday, followed by housing starts on Wednesday, while Thursday brings producer price inflation data, the leading indicator and the Philly Fed index. The week rounds out with consumer inflation numbers and a speech by the cryptic Federal Reserve Board chairman, Alan Greenspan.

“A blizzard of winter economic data would appear to provide lots of ammunition in a holiday-shortened trading week,” CIBC predicts. “As it turns out, the consensus didn’t end up too far from our forecasts for industrial activity and consumer prices, though we see risks that housing starts will disappoint. With consumer spending also off to a slow start in January on weaker auto sales, GDP growth early in the quarter will rest on industrial output gains tied to exports, inventory building and business capital spending.”

Nesbitt says that the key for the week in the U.S. is the January headline inflation statistics. “A bit of energy price strength would be shrugged off by the markets. But risks of a core price surprise in the CPI, PPI, or both, represent a market vulnerability. We believe one-month’s bad news would certainly be easy for the markets to absorb, since Greenspan has suggested inflation is not a near-term Fed worry,” Nesbitt offers. “A turn in the core inflation trend, which is not expected by the markets during first-half 2004, would be a crucial adverse development for interest rates.

“All journeys start with a first step. So, we’ll be watching the core inflation reports closely, mindful that the already-reported core import price figures were bad,” Nesbitt says. The brokerage house also expects to see some softening in the Fed survey and housing starts. “Industrial production, on the other hand, is due for a show of strength. We expect a very substantial bounce in output, reflecting vigorous retail activity and an upswing in inventories.”

There are a number of firms slated to report earnings next week, although none of them are real heavyweights. Boardwalk Equities Inc. reports on Monday, as does Canadian REIT. Angiotech Pharmaceuticals Inc., Goldcorp Inc., Glamis Gold Ltd., Loblaw Companies, MacDonald, Dettwiler and Associates Ltd., Stelco Inc., Terasen Inc., Teva Pharmaceutical Industries Ltd. and West Fraser Timber Co. Ltd. all report on Tuesday.

On Wednesday, we’ll hear from Cambior Inc. NAL Oil & Gas Trust, Petrofund Energy Trust and Stillwater Mining Company. CAP REIT report on Thursday, along with Gaz Metro LP, Inter Pipeline Fund, Morguard REIT, PrimeWest Energy Trust, Shermag Inc. and Teknion Corporation. Advantage Energy Income Fund reports on Friday to finish things off.


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