Economic data

Jun PPI fell .4% headline, .2% more than expected but the core rate rose .3% vs the consensus of up .2%. Headline PPI is still up 7% y/o/y and 2.4% ex f&f (most since July ’09). The drag on the headline figure was the 2.8% decline in energy prices with gasoline prices down 4.7%. This more than offset the .6% gain in food prices. Helping to lift the core gain was a .2% rise in passenger cars and 1.6% jump in trucks as the limited supply of new cars gave it a lift. While expecting somewhat higher retail apparel prices in the 2nd half, men’s wholesale apparel prices rose by .7% m/o/m but women’s were flat. While inflation in the pipeline moderated because of the recent drop in energy prices, they still remained robust. Goods in the intermediate stage of production saw prices rise 11% y/o/y, flat m/o/m (core though up .3% m/o/m) and the 1st stage of production saw prices fall m/o/m but were still up 26.2% y/o/y and 25.6% ex f&f. Bottom line, commodity prices whip around the PPI figure but prices remain elevated notwithstanding the recent drop. The market though will more focus on tomorrow’s CPI where the y/o/y gain is expected to be 3.6%, flat with May.

Initial Jobless Claims totaled 405k, 10k below expectations but the prior week was revised up by 9k to 427k. It is the 14th week in a row above 400k but today’s figure is the lowest since mid April. The 4 week average fell to 423k from 427k. Continuing Claims did rise 15k and was 47k higher than forecasted. Extended Benefits did fall by 16k. It’s a broken DVD (record) to continue to say the labor market is lackluster as all we had to do was see last Friday’s payroll figure but maybe today’s initial claims number is a step toward below 400k readings.

June Retail sales rose .1% headline and .2% ex auto’s and gasoline. The headline figure was better than the expected .1% decline but taking out both auto’s and gasoline, sales were below an expected .4% gain. Getting to the core rate, which also takes out building materials, sales rose just .1%. Vehicle sales rose by .8% after 3 months of declines partly related to supply issues with Japan. Sales rose for clothing, dept stores, food/beverages and online retailers but fell for restaurant/bars, sporting goods, electronics, furniture and health/personal care. Bottom line, overall retail sales were mediocre and I say overall because clothing and department stores were good as seen in last week’s June comps. We were also tipped off on the vehicle # when mfr’s reported sales for June two weeks ago that were initially below forecasts. A key focus for 2nd half retail for clothing related sales will be the price hikes that are coming in response mostly to high cotton prices. Lackluster wage growth and job growth, elevated commodity prices and continued delevering will continue to be the factors influencing the back half of ’11 sales.

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