THE BASIS POINT

Fundamentals 11/15: Producer inflation, retail sales down. Manufacturing up.

Inflation: PPI (Wholesale Inflation)
-PPI Month/Month: -0.3%
-PPI Year/Year: 5.9%
-Core PPI (less food & energy), Month/Month: 0.0%
-Core PPI (less food & energy), Year/Year: 2.8%
-Month/Month core could not get any flatter
-Rates slightly better on news

Retail Sales (October)
-Retail Sales, Month/Month: +0.5%
-Retail Sales less autos, Month/Month change +0.3%
-Retail Sales growth slowed from September’s +1.1%. This data supports the Consumer Metrics Absolute Demand Index which showed a sudden decrease in online sales of discretionary durable goods which starting on October 27. In a bizarre coincidence that was the day the 3Q2011 GDP was announced at +2.5%.

Why are consumers spending less? Per-capita real private sector wages has contracted -8.6% below the peak of the 1Q2007. The discontent that the average person has with their income situation is backed by the data.

The point I would like to make here is that unless consumer spending picks up we are headed for slower GDP growth in 4Q2011 and the increased possibility of a recession for the first 2 quarters of 2012.

Worse yet is media obfuscation. The WSJ on-line edition headlines “Retail Sales Advance.”

This is backed up by:

Store Sales
-ICSC-Goldman Store Sales, Week/Week: -0.8%
-ICSC-Goldman Store Sales, Year/Year: 2.4%
-Redbook Store Sales, Year/Year: 4.1% down from +4.6%

Business Inventories (September)
-Inventories – Month/Month change 0.0 %

Empire State Manufacturing Survey
-November manufacturing index activity was +0.61
-Zero is line between growth/contraction
-October was -8.48, fifth straight monthly contraction.
-Today’s +0.61 is first gain since May
-Bloomberg’s report
-Full NY Fed’s report

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