THOUGHTS ON THIS MORNING’S DATA

A little bit of mixed data this morning.   Retail sales were strong across the board, but we’re in the middle of a very easy comps season so it’s difficult to glean much from the strength.  The ICSC reported a 2.4% year over year jump in sales and the Redbook reported a 2% year over year climb.  This is certainly good news for the bulls and hints at what could be a better than expected holiday sales season.

The latest PPI data continues to show little to no signs of inflation.  Econoday reports:

Higher oil prices boosted the headline PPI but the big story is a sharp decline in the core PPI. The overall PPI increased 0.3 percent in October after dropping 0.6 percent the month before. The rebound in October lower than the consensus forecast for a 0.5 percent boost. The increase in the latest month was led a 1.6 percent boost in energy and a 1.6 percent rise also for food. But at the core level, the PPI rate unexpectedly dropped 0.6, following a 0.1 percent dip in September. The market had expected a 0.1 percent gain for September. The fall at the core level was due mainly to declines in prices for light trucks and passenger cars. The Bureau of Labor Statistics indicated that the core would have been up 0.1 percent in October.

This data appears to be at odds with the inflationary environment gold, commodities and equities have been giving off.   Perhaps more important in this data is the fact that it shows investors are simply moving out of dollars and into real assets – not as a sign of inflation worries loom, but as investors lose faith in the longevity of the United States and the paper we print our money on.

Industrial production and capacity utilization continue to represent the slow recovery story.  While there is no doubt that there is a tepid recovery in both, it’s quite obvious that the recovery is nowhere near the v-shaped recovery many investors are discussing.   Without government stimulus, it’s difficult to imagine that the economy would in fact be recovering at all.