March PPI rose .7% m/o/m, .2% above expectations but the core rate was in line, up .1%. Food prices rose 2.4% m/o/m while energy prices were up .7%. Both make up a total of about 40% of PPI. Keeping the core rate muted was a 1.1% drop in passenger car prices, .1% fall in light trucks and .1% drops in prescription drugs and women’s apparel. Inflation in the pipeline looks elevated as PPI at the intermediate stage of production rose .6% headline and .7% core. At the initial stage, headline PPI rose 3.2% and 6% core, 33.4% y/o/y and 44.5% y/o/y respectively. Bottom line, the rise in commodity prices is showing up in the PPI while owner’s equivalent rent helps to keep a lid on the CPI. With respect to the policy tightening that has begun in Asia, their inflation figures are much more weighted towards commodity prices, particularly food in India.
Initial Claims totaled 456k, 6k higher than expected but down from the Easter and Cesar Chavez holiday influenced 480k last week. It seems that today’s figure is clean of the seasonal distortions. The 4 week average, which smoothes out the noise, rose to 460k from 458k last week, a 5 week high. Continuing Claims rose 46k more than expected but were down 40k from last week. Those receiving extended benefits fell a sharp net 479k with those specifically receiving EUC falling to the lowest since Jan 8th. But, there was a lull in the extension of employment benefits over the past few weeks due to the battle in Congress and thus some may have seen their benefits expire. On the other hand, hopefully many found new jobs. It will though take a few more weeks to see what the real figure is but the still elevated pace of initial claims says that while hiring is taking place, it is still muted. This also squares with the recent subdued confidence data.