U.S. Tuesday Data Highlights

October 18, 2011

A greater-than-assumed 2.3% leap in producer energy prices spearheaded last month’s 0.8% rise of the overall PPI index and lifted on-year energy price inflation to 18.4% from 15.9% in the year to August.  Core producer price inflation is in the Goldilocks zone.   A monthly gain of 0.2% after 0.1% in August isn’t excessive, but by the same token, deflation hardly seems a threat when core producer prices showed a 12-month 2.5% advance in both months.

Where’s the bottom in housing?  During the Great Recession, it was commonplace to hear predictions that a return to trend long-term growth would not be possible until the problems in the labor market and housing market are fixed.  The National Association of Home Builders monthly confidence index had an October reading of 18, four points better than in September and even a point above the prior 2011 high of 17 in March.  The average reading this year of 15.7 is nonetheless almost 10 points below the 2006-2010 mean.  The housing market is closer to a bottom but not quite there yet.  Residential investment fell 47% between the second quarter of 2007 and 2Q11.  That’s a 14.7% per annum rate of contraction over four years.

Chain store sales according to the weekly ICSC-GS index edged up 0.1% last week following a 0.1% dip in the prior week, a 0.1% uptick in the week to October 1, and a 0.2% drop in the week to September 24.  A static chain store sales trend is also suggested by the Johnson-Redbook index.  Personal consumption has performed admirably considering the very depressed state of consumer confidence and a jobless rate of 8.9% or higher in every month but one since April 2009.  If a recession is avoided in 2012, it will be because of consumption, but the household sector will not return to the pre-financial crisis trend for at least another five years, if that.  In its heyday, consumption chronically outpaced worker incomes, supplemented by falling inflation, the shift to multiple family wage earners, and the high popularity of home equity loans.

On August 5, S&P gave a thumbs down to the congressional deal that lifted the debt ceiling and averted a U.S. default.  Paradoxically, long-term interest rates have fallen since the S&P decision, and August capital flows reported today by the Treasury Department quantified the stampede into U.S. Treasuries.  Foreign net purchases of U.S. securities in August total $66.0 billion, up from $24.1 billion in July and the most since January.  Long-term Treasuries comprised $60.1 billion of the August figure.  $57.9 billion of net long-term capital came into the United States, up from $9.1 billion in July.  A broader aggregate of net capital flows including Treasury bills and other short-term securities swung from a net outflow in July of $52.4 billion to a net inflow in August of $89.6 billion.  The average monthly net capital inflow, measured by the Treasury’s most inclusive tally, had been $39.0 billion in the first half of 2011 and $23.5 billion in 2010.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.