PPI: -0.2%; Are We All Clear?
The Producer Price Index for finished goods declined 0.2 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods increased 1.1 percent in September and 1.7 percent in August. At the earlier stages of processing, prices received by manufacturers of intermediate goods edged down 0.1 percent in October, and the crude goods index moved up 0.9 percent. On an unadjusted basis, the finished goods index advanced 2.3 percent for the 12 months ended October 2012, the largest rise since a 2.8-percent increase for the 12 months ended March 2012. (See table A.)
Hmmmm… The table shows a 0.4% increase in foods, offset by a 0.5% decrease in energy and a -0.2% decrease in everything else.
The decrease was led in the core by a decrease in pricing for new vehicles. That’s an interesting change in trend, and may indicate that pricing power has exhausted in the vehicle space. If so the results in the car makers over the next three or so months should be apparent.
One month does not make a trend, but this is not positive.
The other interesting point is that crude goods, which had been decreasing through the “belly” of 2012, were basically flat-lined on a 12-month basis while Intermediate goods on core were flat as well.
The report is overall neutral with one cautionary note, and that is to watch the autos in December and January when the retail trade figures come out for those months to see if this bleeds through into final demand.
Retail Sales: -0.3%
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $411.6 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but 3.8 percent (±0.7%) above October 2011. Total sales for the August through October 2012 period were up 4.7 percent (±0.5%) from the same period a year ago. The August to September 2012 percent change was revised from 1.1 percent (±0.5%) to 1.3 percent (±0.2%).
Retail trade sales were down 0.3 percent (±0.5%)* from September 2012, but 3.8 percent (±0.8%) above last year. Gasoline stations sales were up 7.7 percent (±1.7%) from October 2011 and nonstore retailers were up 7.2 percent (±3.0%) from last year.
I find this an interesting report for a number of reasons, with one of the most-interesting being the distribution of gains. For example, the gross gain from October 2011 was $20.418 billion.
Gasoline was $3.76 billion of that increase. Autos were $5.955 billion; between the two that was nearly half of the advance.
In general the report was quite a bit more-solid that I had originally expected, given that Sandy was in there. Another point is that unadjusted sales were actually up 3.5% — so beware the so-called “seasonal adjustments” as well.
Verdict: Neutral to mildly-positive, which probably explains the market basically ignoring the release.