Week Ahead: Inflation Data and Earnings

Investors will get several opportunities next week to review data tied to inflation, an increasingly important factor as pressure has increased on the Federal Reserve to loosen fiscal policy even further.

On Tuesday the Labor Department will release its May report on import prices. Lower fuel costs have reduced import prices on goods brought into the U.S. in recent months Overall, import prices fell 0.5% in April.

Wednesday and Thursday bring reports on producer prices and consumer prices, respectively. The pullback in energy prices has also affected producer and consumer prices. The Producer Price Index, due Wednesday, gauges wholesale prices, while the Consumer Price Index, due Thursday, measures a fixed group of items and services regularly purchased by consumers.

Three consecutive months of disappointing jobs reports, including a horrendous May report released last week, has escalated calls for the Fed to step in once again in an effort to spur economic growth.

An unprecedented level of intervention by the Fed since the economic crisis three-and-a-half years ago, including a trillion dollars in U.S. government bond purchases, has arguably kept the U.S. from falling into a depression, but the programs haven’t produced the hoped-for economic recovery.

Critics of the interventionist policies, including some members of the Federal Reserve, say the strategy of loose fiscal policy will lead to high inflation.

On Thursday Federal Reserve Chairman Ben Bernanke acknowledged the recovery has met with obstacles and once again signaled the Fed’s willingness to step in if necessary. But, as usual, he stopped well short of specifics.

The entire Federal Open Markets Committee, which sets most fiscal policy, meets again June 19 and 20.

Retail sales for May are due Wednesday and should provide a snapshot of whether consumers are pulling out their wallets for goods beyond necessities such as food, shelter and fuel.  Economists predict the numbers will show that consumers are spending less as the job market has tightened.

The preliminary reading of June consumer sentiment is due Friday and the number is expected to fall. Data on industrial production is also due Friday and it's expected to show a small gain last month.

Only a handful of earnings reports are due, including supermarket chain Kroger (NYSE: KR), high-end apparel designer Michael Kors Holdings Ltd. (NYSE: KORS) and Smithfield Foods (NYSE: SFD), the largest U.S. pork producer.