Producer Price and Retail Sales are out for the month of June, and there is some good news and some bad news. Those prices look higher on the surface, with a caveat. And Sales look stronger than expected, also with a caveat.
As we expected yesterday, we have seen a much higher Producer Price Index reading which measure the wholesale inflation. The nominal PPI came in at a whopping +1.8% and came in at +0.5% on the core PPI measuring prices on an ex-food and ex-energy basis. Those estimates were less than 1% on the nominal level and were only +0.1% on the core rate. We still believe that this has already come back down as that reflects oil and commodity prices which were higher throughout June than what we have seen this month.
On the retail sales front, we are seeing a gain of +0.6% on the nominal retails sales and +0.3% on an ex-auto basis. We had penciled in estimates as being +0.5% on the headline number. But this gain also has a caveat. On an ex-gas and auto basis the report was -0.2%.
There is some pause for concern here if you do not consider the situation. If you look at the commodity price actions, the implied thought would seen to be that so far this was a one-time event.
JON C. OGG
JULY 14, 2009
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