Data Week in Review

We predicted on Monday that this week’s data would show that 1) core price pressures remain contained (because that which is not “contained” is ex’d out), that 2) consumer activity will continue to grow and 3) that manufacturing is booming. Let’s take a look.

Core CPI rose 0.2% vs consensus of 0.1%; core PPI rose 0.5% vs expectations of 0.3%. Core consumer prices are 1.0% above their year ago level, one of the slowest paces in the 52 years of data collection. Fine and dandy, and of course when transportation, apparel and medical care prices begin to spark, suppose we can ex those out too. And eventually, growing price pressures at the producer level will filter through.

Next, consumer activity continued to grow alright, but a tad slower than the St expected, given forecasters are now used to consumers broaching expectations. Some blame it on weather. But the weather was no secret. We’ll see. Retail sales rose 0.3% in Jan vs expectations of 0.5%. The consumer is alright, and is still shopping despite high unemployment, sluggish income growth and tight (but now loosening) credit.

Finally, manuf activity is indeed booming. We saw that activity of NY based firms improved further in February, and today, that activity in the mid-Atlantic region (Phil Fed survey) is off the charts, the survey at the highest level since Jan/04; new orders at the best pace since Sep/04; shipments at the fastest pace since July/04 and employment at its highest level since record keeping began in 1968.

(We did receive the Bloomberg consumer conf survey today and it was lower. Ignore all confidence surveys. They contain nearly zero leading characteristics, our experience.)

Bottom line: Basement price pressures are building, yet are on the radar so nothing really mkt moving yet, that is, this reality is priced in. Manuf activity and related employment was not on the radar and will cause forecasters to improve their forecasts. Finally, after our significant insight early on regarding consumer activity, we are now in neutral and will monitor this sector over the near term.


Robert Craven