The markets were bracing for some horrible news on the economic front, and while these numbers are all bad they are not quite as bad as some of the trader chatter was expecting yesterday.
The PPI: producer prices came in -0.1% on the nominal front and were +0.2% on a core basis as measured on an ex-food and ex-energy basis along with anything else deemed volatile. But on a year over year basis these numbers are still high with +7.2% on the nominal PPI came in at +6.3% (from 7.2% in November), and the core rate came in at +2%. Expectations for PPI were roughly +0.2% on both the core and nominal PPI.
December retail sales also came in weak with a -0.4% reading, and were -0.4% on an ex-autos basis as well. Expectations were 0.0% headline and -0.1% ex-autos, but that seemed like a poor estimate that wasn’t factoring in enough.
The New York Federal Reserve’s EMPIRE MANUFACTURING INDEX came in at 9.03. Estimates were around 10.0.
These numbers may fuel the thought that FOMC has more room to cut rates without inflation spiking higher. The rumors (more like hopes) of an inter-meeting rate cut were out yesterday, and Fed Fund Futures were showing chances were high for a 75-basis point cut by the end of February.
Jon C. Ogg
January 15, 2008
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