Economic data

Jan CPI rose .4% m/o/m headline, .2% m/o/m core, both above expectations of up .3% and .1%. The .4% gain is for a 2nd straight month and the .2% core gain is the most since Oct ’09. The y/o/y headline gain is now 1.6% and core is up 1% y/o/y. The absolute level of inflation is at a new record high. Energy prices were up 2.1% and food was up .5%. Owners Equivalent Rent, 24% of headline and about 40% of core, was up a modest .1% but look for that to change in ’11 as apartment vacancies continue to drop, more people want to rent and landlord’s get pricing power. Evidence of this is that ‘rent of primary residence’ rose .2% for a 3rd straight month. Commodities, 40% of CPI, rose .9% and likely reflecting the increase in cotton prices, apparel prices rose 1% for the month. Bottom line, US Treasuries aren’t fazed by the data but the inflation worm has turned at the consumer level and will continue to rise in ’11.

In what seems like a clean data point, free of weather distortion seen over the past month, Initial Jobless Claims totaled 410k, 10k above expectations and up from a revised 385k last week. Smoothing out the lumpiness over the past few weeks has the 4 week average at 418k vs 416k last week. Continuing Claims rose 1k but Extended Benefits fell a net 85k. Bottom line, the pace of firings remain near the lowest since the recovery began but still claims remain stubbornly above 400k. That pattern should change if the economy continues to improve of course but the pace of improvement in both firings and new hiring’s still point to an uneven recovery.

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