Retail sales weak, PPI down, confidence up

On the economic front this morning, the Producer Price Index dropped 0.9% in August, versus expectations for a decline of 0.5%. The core PPI was up 0.2% on the month, in line with forecasts. The overall PPI was up 9.6% from a year ago, down from a 9.8% rise in July. The core PPI rose 3.6%, compared with a 3.5% YOY rise one month prior. This was expected considering the decline we saw in energy prices last month.

August retail sales were the bigger story, and they were generally disappointing. Overall sales fell 0.3% against forecasts for a 0.2% gain. Strip out autos and you got a 0.7% decline, compared with expectations for a 0.2% drop. Even if you strip out both autos AND gas, you still get a poor reading: -0.4%. Food and beverage spending (+0.7%) showed some strength, as did sporting goods (+0.5%). But spending on general merchandise was down (-0.2%), as was spending on clothing (-0.3%), building materials (-2.2%), and electronics (-1.3%)

On the other hand, the University of Michigan's consumer sentiment index brightened in August -- to 73.1 from 63 (and against forecasts of 64.1). Personally, I don't find the sentiment index very useful. It seems to just move up and down with the stock market (and more recently, gas prices).