THE BASIS POINT

Retail Sales Up. Rates May Follow.

Mortgage bonds open the week down slightly: MBS 3% and 3.5% coupons that lenders use as benchmarks to price rate sheets are down 8 and 3 basis points respectively. Rates rise when MBS prices drop, and rates shouldn’t rise today unless this selloff expanded.

Below is a rundown of today’s U.S. economic data which kicks off a very busy week. Retail sales up but offset by a third straight monthly contraction in New York area manufacturing.

Retail Sales (September 2012)
– Retail Sales – Month/Month +1.1%
– Retail Sales less autos – Month/Month  +1.1%
– Less Autos & Gas – Month/Month +0.9%
– Previous overall was +1.3%
Full report

The Retail Sales data is never adjusted either for inflation or season.  Sales at electronics and appliance retail outlets were +4.5%.  Presumably the iPhone 5 gave a healthy contribution to the gain in Retail Sales.

Empire State Manufacturing Survey (October 2012)
– General Business Conditions Index Level is -6.16.
– Previous was -10.41
– Zero is the dividing line between expansion and contraction
– This is the third straight contracting month

New York State had driven business out for decades with high property taxes which are now capped at 2%.  According to the Washington, D.C.-based Tax Foundation New York State has the highest cumulative tax burden of the 50 states.

Here’s the full report, and chart below:

Business Inventories (August 2012)

Inventories – Month/Month change 0.6%.  Previous was +0.8%.

$XRT

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