Interest Rate Roundup

Thursday, December 13, 2007

Retail sales strong; Wholesale inflation soars

More economic data has been rolling in. So let's get right to the figures:

* November retail sales rose 1.2%, double expectations for a 0.6% gain and the biggest rise since May. Retail sales excluding autos were also strong -- up 1.8% against expectations for a 0.6% rise. That was the biggest since January 2006. Sales at service stations were strong, reflecting the increase in gas prices. But even sales ex-gas were up 0.6% versus a 0.1% drop in October.

* But the real scary figures were on inflation. The Producer Price Index soared 3.2% between October and November. That blew away the 1.5% estimate and was the largest gain in any month going back more than 34 years. The "core" PPI (ex food and energy) jumped 0.4%, the biggest gain since February and double the 0.2% forecast. Year-over-year, producer prices are up 7.2% (the most since November 1981, shown in the chart above), while core prices are up 2%.

Further up the food chain, intermediate goods prices rose 3.7% on the headline and 1% on the core. Crude goods were up 8.7%, though core crude prices were down 0.5%.

* Jobless claims fell 7,000 to 333,000 in the week of December 8. The recent peak was 353,000 the week of November 24.

In early market reaction, stock futures are down but off their lows. Long bond futures are down almost a point, while 10-year yields are up about 8 basis points. The dollar is up a bit.


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