Retail Sales Growth & Consumer Comfort Fall

Jobless Claims Spike

Bears may have gotten excited by the spike in jobless claims, but it is irrelevant. It doesn’t mean anything bad is happening to the economy. Especially just because a few states including the large states of Pennsylvania and California estimated their results. If results are estimated, they can be incorrect. 

We will have this sorted out in a few weeks. I’m guessing there isn’t a problem with the labor market. Even so, the spike in claims wasn’t dramatic.

As you can see from the chart below, the number of claims increased 14,000 to 225,000 which was above estimates by 10,000. Claims being estimated means there might not have been an increase, but even if there was, it’s not much cause for concern. We need to see the 4-week moving average increase above 270,000 to forecast a recession. 4-week average only increased from 215,250 to 217,000. Continuing claims stayed low as they were 1.683 million and the 4-week average was 1.688 million.

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Weak PPI Inflation

PPI inflation rate measures the changes in producer prices. It is ahead of consumer price changes because producers buy raw materials and sell the final products to consumers. PPI reading is supposed to lead CPI. If that happens, CPI and core CPI will fall just like the recent charts predicted. 

Specifically, headline yearly PPI was 1.1% which beat estimates for 0.9% but fell from 1.4%. The chart below shows it has been in a downtrend for about a year. PPI excluding food and energy was 1.6% which matched estimates and fell from 2%. It’s below the all-important 2% Fed target, unlike core CPI. 

Finally, core PPI excluding trade services fell from 1.7% to 1.5%. Monthly trade services inflation was 0.8%. Headline monthly inflation was 0.4%, but without trade services, food, and energy, it was just 0.1%.

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Consumer Confidence Crashes

Bloomberg consumer comfort survey isn’t followed as closely as the University of Michigan and Conference Board reports. But I still follow it. It’s real data from phone interviews. Comfort index showed much more optimism than the other 2 readings this summer. 

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