Fundamentals 8/18: Inflation, Home Sales, Jobs, Manufacturing

Consumer Inflation
-CPI Month/Month: +0.5%
-CPI Year/Year: +3.6%
-Core CPI Month/Month (less food & energy): +0.2%
-Core CPI Year/Year (less food & energy): +1.8%
-This retail inflation is always difficult to explain because while it is most certainly the overall number which affects everyone, it is core which is of interest to economists because core is what shows the trend in inflation. Under the present circumstances both of these numbers are too high. My belief is that further expansion of money supply (QE) will increase inflation while doing little to stimulate growth. One obvious point: we aren’t having deflation.

Initial Jobless Claims
-408,000 for week ended August 13
-Up 9,000 from previous week’s revised 399,000
-4-week moving average 402,500, up 3,500 from previous week
-This shows a continuing weak jobs market.
-The “we got under 400,000” euphoria of last week has dissipated.
Initial Joibless Claims

July Existing Home Sales
-Level (Seasonally Adjusted Annual Rate) 4.67m
-Month/Month -3.5%
-Year/Year +21.0%
-Median existing-home price $174,000, down 4.4% from July 2010
-Distressed sales were 29% of sales
-Inventory fell 1.7% to 3.65m, a 9.4-month supply
-All-cash sales were 29% of transactions
-Investors account for the bulk of cash purchases.
-First-time buyers purchased 32% of homes
-Investors accounted for 18% of purchase activity
-Rest of sales were to repeat buyers, a 50% market share

Philadelphia Fed
The Philadelphia Federal Reserve survey of August manufacturing activity in that region dropped a mind-boggling -30.7.

What I find most compelling is that despite higher than expected inflation (which, after all is said and done, should be the driver of interest rates) we saw a major bond rally yesterday which continues today.

The technical patterns of the 30-year bond future which I use the forecast rate movement are extremely bullish and indicate the possibilities of a move in yields into uncharted territory.

Leading Economic Indicators
-Leading Indicators – Month/Month change for July +0.5%.
-Because of volatility and the way this index is constructer I would deem this datum useless at present.