Economic data

Aug Retail Sales were much better than expected. Including clunkers, sales were up 2.7% vs expectations of a gain of 1.9%. Ex clunkers, sales were up 1.1%, .7% more than expected and ex clunkers and gasoline stations, sales were up .6% vs the estimates of flat. Sales for auto/parts were up 10.6% and gasoline station sales rose 5.1%. There were also gains seen in clothing, sporting goods, electronics, dept stores, on line retailing and restaurant/bars. Furniture and Building Materials were the only 2 categories that saw declines. Bottom line, the report is a pleasant surprise ex auto sales as there was a fear that the clunker plan would steal sales from other categories. There were tax holidays and the Labor day calendar shift that helped to boost sales and the same store sales data for Aug seen 2 weeks ago were better than expected. With the clunker plan now over, we’ll see what impact overall it will have in the Sept data next month.

The Sept Empire Fed manufacturing survey was 18.9, almost 4 points more than expected, up from 12.1 in Aug and it reached its highest level since Nov ’07 when it was at 25. New Orders rose to 19.8, up almost 6.5 points from Aug. Shipments though moderated by 9 points after jumps in July and Aug. Backlogs remained negative still but rose almost 5 points. Employment stayed sluggish, falling about 1 point to -8.3 but Aug saw a big improvement from July. Prices Paid rose almost 7 points and Prices Received, while still negative, rose 9 points and both are at Nov ’08 highs. For those looking for a boost in inventories didn’t get it as it fell almost 3 points and this category will be a key focus as we look at all the manufacturing surveys. The 6 month outlook rose 4 points to the highest since Nov ’04. Net-net, manufacturing is a key component of the 2nd half recovery theme and today’s # confirms that improvement in the NY metro area.

Aug PPI rose 1.7%, .9% more than expected while the core rate was up .2%, .1% more than estimates. The y/o/y headline decline of 4.3% was the smallest since April as we begin to cycle thru the big drops in commodity prices and start to capture the bounce back. An 8% rise in energy prices was the main catalyst for the headline upside surprise. Food prices rose .4%. Helping to boost the core was a .7% price gain in passenger cars and an .8% rise in light trucks. The lack of supply and clunker demand gave auto makers pricing power. Inflation in the pipeline, as measured by intermediate goods, rose smartly, up 1.8% headline and .6% ex f&f and rose 3.8% headline and 6% at the core in the first stage of production, thus adding evidence that the disinflation trends over the past year has run its course.