THE BASIS POINT

Fundamentals 10/18: Business Inflation, Housing, Retail

Inflation (Wholesale)
-PPI – Month/Month +0.8 %
-PPI – Year/Year +7.0 %
-PPI less food & energy – Month/Month +0.2 %
-PPI less food & energy – Year/Year +2.5 %
-This is inflation at the wholesale level. The numbers are high but businesses have been profitable and able to absorb the increases in the raw material costs. Inflation is much more insideous when it bleeds over to CPI.

Housing Market Index
-Housing Market Index value was 18 for September.
-Previous was 14. Consensus was 15.
Full report from National Association of Home Builders.
-Here’s a quote: “This latest boost in builder confidence is a good sign that some pockets of recovery are starting to emerge across the country as extremely favorable interest rates and prices catch consumers’ attention,” said NAHB Chief Economist David Crowe. “However, it’s worth noting that while some builders have shifted their assessment of market conditions from ‘poor’ to ‘fair,’ relatively few have shifted their assessments from ‘fair’ to ‘good.’ One reason is that builders are facing downward pricing pressures from foreclosed homes at the same time that building materials costs are rising, and this is further squeezing already tight margins.”

Retail
-ICSC-Goldman Store Sales Week/Week: +0.1 %
-ICSC-Goldman Store Sales Year/Year: +3.6 %
-Redbook Year/Year Change +4.6%

Consumer Metrics
The Consumer Metrics indices based on on-line shopping have flattened after their sharp increases in July & Auguest. This may portend increased 3rd Q 2011 GDP growth followed by flat 4thQ GDP growth. First look at 3rdQ 2011 GDP will be Thursday October 27. If it as strong as Consumer Metrics would indicate that would cause equity buying and Treasury selling. This is the same week when we may see significantly increased angst about Eurozone debt. Next week could be a roller coaster.