It was a short week for economic news due to the Veterans Day holiday on Monday. A special thank you to all the Veterans who have served our great country and afford us the freedoms we all hold dear.
Inflation was the big news for the week. On Wednesday, the Bureau of Labor Statistics (BLS) released its Consumer Price Index (CPI) report for October. The report showed that consumer prices came in exactly as expected, alleviating some traders’ fears that inflation would accelerate. CPI rose 0.2% in October (est = 0.2%) and 2.6% form a year ago (est = 2.6%) while Core CPI rose 0.3% (est = 0.3%) and 3.3% from a year ago (est = 3.3%). There were declines in gasoline, fuel oil and apparel prices, while food, transportation, medical care and shelter rose. The shelter component represented more than half of the monthly increase in prices and continues to be the most stubborn portion of core inflation. The closely watched “Supercore” (core services less housing) increased slightly to 4.38%, the first monthly increase since April, indicating core inflation still remains too high for the Fed.
The BLS also released the Producer Price Index (PPI) on Thursday. PPI measures the change in the price of goods as they leave their place of production, making the index a good measure of inflation from the wholesale level. Headline PPI increased 0.2% in October (est = 0.2%) and 2.4% from a year ago (est = 2.3%). Removing more volatile items Food and Energy, the index increase 0.3% (est = 0.2%). Over three-fourths of the overall increase in the headline number came from services with much of that increase coming from prices for portfolio management.
Retail Sales (not adjusted for inflation) advanced 0.4% MoM (est = 0.3%) with nearly three-fourths of that increase coming from the volatile Motor Vehicle component. The Retail Sales Control Group, which strips out the more volatile categories of consumer spending declined -0.1% (est = 0.3%).
All in all, this week’s data was largely in-line with expectations, but will likely be somewhat disappointing to Fed Officials as price growth remains above a pace that is consistent with the Fed’s target of 2% inflation. As of the time of this writing, markets were still projecting a 62% chance of a 25bp rate cut in December. Looking ahead to next week, we’ll get a look at Housing Starts, Leading Economic Indicators, and Consumer Sentiment.
Have a great weekend!
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Author
Dillon Wiedemann
Financial Analyst
The Baker Group LP
DWiedemann@GoBaker.com
800.937.2257
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