Thoughts on retail sales and import prices
* Retail sales rose 0.3% in August, below expectations for a 0.5% gain. If you exclude autos, sales were down 0.4%, versus expectations for a 0.2% gain. However, July's gain was revised up to 0.5% from 0.3% on the headline, and July's ex-autos gain was revised to +0.7% from +0.4%. Also, a drop in gasoline station sales (due to falling gas prices) helped suppress sales.
* Import prices fell 0.3%, compared with forecasts for a 0.2% rise. The previous month's gain was revised down to 1.3% from 1.5%. That puts import prices up just 1.9% year-over-year, down from a 2.8% gain in July.
* However, there are a couple of interesting things to look at in the import price figures. First, if you exclude all fuels (natural gas, oil, etc.), you see that import prices were up 0.2% on the month. So if you want to believe (like the Fed does) that energy doesn't count, you can't be too sanguine about import inflation. And we all know that oil prices have been surging THIS month, meaning the August drop will be reversed in short order.
Second, imports from China are rising consistently in cost. They were up 0.3% in August after rising 0.3% in July, 0.4% in June, and 0.3% in May. In other words, it looks like cheap Chinese goods -- which have held down U.S. consumer inflation -- may be getting a bit pricier.
* The immediate market reaction: A further drop in stock futures ... a reversal of slight gains in the Dollar Index ... and a half-point gain in long bond futures prices.