Economic data

Taking out the volatility and the noise, July Retail Sales EX auto’s and gasoline station sales fell .1% vs an expected rise of .1% but the prior month was revised up .1 of a pt. Also, sales both headline and ex auto were a touch below expectations but headline was revised up by .2 of a pt. The so called core #, which takes out auto’s, gasoline and building materials, fell .1%. Sales fell in furniture, electronics, building materials, food/beverages, clothing, sporting goods and Dept stores but rose in auto’s, on line retailers and restaurant/bars. Bottom line, while a touch light relative to expectations, the data follows last week’s chain store data and vehicle sales so the news today is not necessarily new but lackluster remains the theme as core sales fell and are up just 4.1% y/o/y on easy comparisons.

Headline CPI rose .3% m/o/m, the fastest pace since Sept ’09 and vs estimate of a gain of .2%. The core rise of .1% was in line. The headline y/o/y gain is 1.2% and core is up .9%. Energy prices rose 2.6% while food/beverages were flat. With the rise being seen in wheat, corn, soybeans, coffee, cocoa, and cattle, retail food prices will be moving higher. OER, 25% of CPI, and therefore a big swing factor in the data, rose .1% for the 2nd straight month for the 1st time since Apr/May ’09. Apparel prices rose .6% after an .8% rise in June, influenced by higher cotton prices which are just shy of the highest since ’95. Due to cash for clunkers and a slow economy, used car prices rose .8% after a .9% gain in June and it led to a .3% rise in vehicle prices. Medical care fell by .1%, a rare sight. Commodity prices, 40% of CPI rose .5%. Net-net, while inflation is still statistically (not real life) benign, I see no evidence here of overall deflation risks.

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