Retail sales and PPI

Retail Sales in Oct were soft as the core rate, taking out autos, gasoline and building materials, fell .1% m/o/m vs expectations of a gain of .4%. Building materials fell by 1.9%, autos/parts were down by 1.5%, electronics were lower by 1%, furniture sales fell for a 3rd month, clothing sales fell by .1%, department store sales dropped .3%, online retail sales fell by 1.8% (still up 12.6% y/o/y) and restaurant/bar sales were lower by .4%. Sales gains were seen only in food/beverages, health/personal care, gasoline stations and sporting goods. Bottom line, the Northeast storm had an obvious impact to sales in October so its tough to gauge what the natural state of business would have been otherwise. Sales in necessities in the Northeast picked up prior to the storm and sales of everything collapsed after. It’s this reason why the S&P’s didn’t respond much to the broad sales weakness.

Separately, Oct PPI unexpectedly fell .2% m/o/m both headline and core vs the estimate of up .2% and .1% respectively. The y/o/y gains remain above 2% at 2.3% and 2.1% for headline and core. A .5% drop in energy prices offset the .4% gain in food prices. The other key drag was a sharp drop in the price of autos as passenger car prices fell 1.6% m/o/m and truck prices fell by 1.5%. Inflation at the intermediate stage of production was flattish and were mixed at the crude stage. For the market, tomorrow’s CPI will be more of a focus.

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