The markets will more or less go dormant for the Christmas season. Many of the Street’s big economics departments will be closing down, so we’ll look ahead for the next two weeks in this report.

TD Bank notes that recent data releases have merely confirmed that the economic recovery will be lacklustre. Anyway, investors are more worried about the possibility of war with Iraq, and its impact on the economy to worry too much about data. “Markets will settle down to a long winter’s nap for the next couple of weeks. That doesn’t mean anxiety will evaporate. Far from it. In fact, we don’t remember a period when investors have been so quick to extrapolate any tidbit of bad news into a damaging trend,” says BMO Nesbitt Burns.

Nevertheless, CIBC World Markets says that upcoming data should point to the economy outgrowing the U.S. in the fourth quarter, after having trailed in the summer. Next week, Canadian retail sales will be reported on Monday and October’s GDP estimate will be out on Tuesday. The following week will see industrial prices announced on Friday. “October looks to have been a hot month for retailers in the data available from vehicle dealers and department stores. With the same month also showing vigor at wholesalers and manufacturers, look for an above-consensus 0.3% GDP growth in October,” CIBC says.

“The Canadian economy likely churned out another steady but unexciting advance in October,” says BMO Nesbitt. “Most of the building block indicators for GDP posted moderate gains in the month, with employment, manufacturing shipments, exports, and wholesale trade all rising by under 1% in the month. This is expected to generate a 0.2% rise in monthly GDP, which will put growth on course for a 2.7% annual gain for all of Q4.”

On the retail numbers, Nesbitt says that the early reading from department stores, other large retail chains and auto dealers, all point to a strong monthly rise. “We look for a headline increase of 1.2%, which will yield a solid year-over-year gain of nearly 7%. For all of 2002, retail sales are on track to rise about 6% after a modest 4.4% increase the prior year. While the monthly trend in sales has been choppy this year, the underlying story for Canadian consumer spending remains solid, with job growth strong and confidence much firmer than stateside.”

In the U.S., personal income and consumer sentiment estimates will be released next Monday, followed by durable orders on Tuesday and new home sales on Friday. In the following week, consumer confidence numbers are out on Tuesday, and the ISM manufacturing index will also be up.

CIBC World Markets says that consumer confidence readings might improve a bit, but it is cautious on the scale of that improvement due to the war rumblings. “Durable orders, always volatile and hard to forecast, won’t show any improvement in the key capital goods component. And the ongoing drag in the capital goods sector could also contribute to a fourth consecutive sub-50 reading from factory purchasing managers in the ISM survey.”

Nesbitt expects durable good orders to show a snapback from weak October figures. It also suggests that the home sales reports should reinforce the notion that low interest rates really are perking up the economy on a broad basis. “Sales might dip, but they are extraordinarily high on a trend basis.” And, “Perhaps the most important figures in the next two weeks will be the regional and national Purchasing Managers’ reports. The critical national ISM survey is scheduled for January 2. We suspect it will remain annoyingly neutral about the economy. Jobless recoveries like this one are not likely to provide joyous news until all the cost cuts are over.”

There are no companies reporting earnings for the next couple of weeks either. Enjoy the break.