Economic data
Taking out the volatility and the noise, July Retail Sales EX auto’s and gasoline station sales fell .1% vs an expected rise of .1% but the prior month was revised up .1 of a pt. Also, sales both headline and ex auto were a touch below expectations but headline was revised up by .2 of a pt. The so called core #, which takes out auto’s, gasoline and building materials, fell .1%. Sales fell in furniture, electronics, building materials, food/beverages, clothing, sporting goods and Dept stores but rose in auto’s, on line retailers and restaurant/bars. Bottom line, while a touch light relative to expectations, the data follows last week’s chain store data and vehicle sales so the news today is not necessarily new but lackluster remains the theme as core sales fell and are up just 4.1% y/o/y on easy comparisons.
Headline CPI rose .3% m/o/m, the fastest pace since Sept ’09 and vs estimate of a gain of .2%. The core rise of .1% was in line. The headline y/o/y gain is 1.2% and core is up .9%. Energy prices rose 2.6% while food/beverages were flat. With the rise being seen in wheat, corn, soybeans, coffee, cocoa, and cattle, retail food prices will be moving higher. OER, 25% of CPI, and therefore a big swing factor in the data, rose .1% for the 2nd straight month for the 1st time since Apr/May ’09. Apparel prices rose .6% after an .8% rise in June, influenced by higher cotton prices which are just shy of the highest since ’95. Due to cash for clunkers and a slow economy, used car prices rose .8% after a .9% gain in June and it led to a .3% rise in vehicle prices. Medical care fell by .1%, a rare sight. Commodity prices, 40% of CPI rose .5%. Net-net, while inflation is still statistically (not real life) benign, I see no evidence here of overall deflation risks.
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August 13th, 2010 at 10:53 am
Peoples expectations and hopes are being dashed on the rocks of reality (with a little help from Obama and his false advertising — no hope, no change). The full effect of the Depression will soon become evident to those in the upper middle class, who, until now, have been comparatively insulated from its harshest effects. Here’s why:
Unemployment: currently thought to be flat-lining for the foreseeable future — will accelerate (not that that fact will be recognized, officially, until it’s too obvious to ignore). There is still not enough money circulating to support employment at current levels. Mid-level management is still way too fat. Unemployment/underemployment reenforce deflationary tendencies.
Housing: This is, and will remain the primary source of deflation. We’ll get back to late 1980s/early 1990s valuations before we see a bottom, and prices will remain sticky all the way down. This will crush any hopes for economic expansion, generally, while prolonging the duration of the decline.
Wage deflation: Those who remain employed will do so at less pay than they are accustomed to, and what they are accustomed to already can’t service their debt.
Student debt: Not only has America bred a bumper crop of pseudo-educated debt slaves, our system of higher-education is a massive industry that relies on consumers of its product to remain in business. The product is overpriced and offers a ROI potential just behind that of AAA-rated MBSs. Note to kids: Get a job. Note to colleges and universities: Get ready to slash prices across the board, or perish.
The Consumer: Tried to pick up old habits, but reality is having none of it. GWB’s, “just go shopping,” ain’t gonna’ happen this time. Pretty soon, when you go to a car dealer, you’ll be able to choose between brand-new ’09, ’10, ’11 models (I don’t know if there are still any new ’09s available anywhere, but it wouldn’t surprise me).
The Velocity of Money: Unless Obama takes a play from the Nixon handbook and orders wage increases (I realize that Nixon only froze wages, but the precedent of using executive authority to affect wages, at all, is what’s important in this context), or GWB’s check to every taxpayer in the US, we’ll have deflation for the rank-and-file, along with true inflation of the money supply for the short and intermediate terms(which will eventually result in inflation all around, but not until the political mood will no longer support the status quo).
August 13th, 2010 at 11:10 am
A Merrill researcher emails in
Obamacare is going to raise healthcare costs. Or not.
From our CPI report: