Yesterday afternoon in this space, we brought up a recent jump in bond yields: the 10-year had come in at 1.3%. Historically this is still quite low — and still below the Fed’s 2% target rate — but it did draw attention to something we’d seemingly long forgotten about: inflation. Well, pre-market trading activity has sunk into the red upon two new monthly economic reads: Retail Sales and Producer Price Index, both for the month of January.
Retail Sales last month were expected to have come in around 1%, but instead reached +5.3% — the highest read in consumer activity since June, as well as the first positive number in the past four months. It follows a December read downwardly revised to -1.0%. Stripping away volatile auto prices, this figure blossoms to +5.9%, suggesting firmer selling prices at Retail’s core. Ex-autos & gas, +6.1% — both much higher than anticipated. The Control number was also very high, at +6.0%.
Producer Price Index (PPI) final demand for January tripled expectations to +1.3%, and well up from the previous month’s unrevised +0.3%. This clearly depicts some wholesale inflation entering the conversation last month, after pent-up demand keeping PPI somewhat under wraps going all the way back to last spring. Ex-food & energy came in at +1.2%, year over year +1.7%. This is the strongest PPI number we’ve seen year over year since January 2020, notably prior to pandemic conditions.
So it’s a spending revival we’re seeing early in 2021, and that’s giving market participants a bit of cold feet. The Dow still lurks in positive territory at this hour, and may well open at yet another record high, but this ultimately positive economic data is being met with a modicum of derision — the party of cheap money may soon be over. Not that Fed Chair Jay Powell gave any indication of this in his public appearance last week; the Fed appears determined to let the cheap money slosh around in the market until labor finally bounces back, perhaps.
But anyone can see the day of reckoning is somewhere on the horizon, as is the post-pandemic society we’ve all been longing for. Of course, we will get there in stages — not all at once — but if we see more economic prints point in the direction of coming inflation going forward, that day may come sooner than many of us had planned.
Industrial Production for January also came in higher than expected, to +0.9% from an estimate of +0.5%. This is off the previous month’s initially reported +1.6%, and these monthly numbers have been dwindling a bit in recent months, but it’s a positive surprise nevertheless. The all-time high in Industrial Production came in June of last year, +6.24%. Capacity Utilization, also for last month, reached 75.6% — the best monthly read since last February. This was up from an expected 74.8% and initially reported 74.5% a month ago.
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Economic Data Deluge
Yesterday afternoon in this space, we brought up a recent jump in bond yields: the 10-year had come in at 1.3%. Historically this is still quite low — and still below the Fed’s 2% target rate — but it did draw attention to something we’d seemingly long forgotten about: inflation. Well, pre-market trading activity has sunk into the red upon two new monthly economic reads: Retail Sales and Producer Price Index, both for the month of January.
Retail Sales last month were expected to have come in around 1%, but instead reached +5.3% — the highest read in consumer activity since June, as well as the first positive number in the past four months. It follows a December read downwardly revised to -1.0%. Stripping away volatile auto prices, this figure blossoms to +5.9%, suggesting firmer selling prices at Retail’s core. Ex-autos & gas, +6.1% — both much higher than anticipated. The Control number was also very high, at +6.0%.
Producer Price Index (PPI) final demand for January tripled expectations to +1.3%, and well up from the previous month’s unrevised +0.3%. This clearly depicts some wholesale inflation entering the conversation last month, after pent-up demand keeping PPI somewhat under wraps going all the way back to last spring. Ex-food & energy came in at +1.2%, year over year +1.7%. This is the strongest PPI number we’ve seen year over year since January 2020, notably prior to pandemic conditions.
So it’s a spending revival we’re seeing early in 2021, and that’s giving market participants a bit of cold feet. The Dow still lurks in positive territory at this hour, and may well open at yet another record high, but this ultimately positive economic data is being met with a modicum of derision — the party of cheap money may soon be over. Not that Fed Chair Jay Powell gave any indication of this in his public appearance last week; the Fed appears determined to let the cheap money slosh around in the market until labor finally bounces back, perhaps.
But anyone can see the day of reckoning is somewhere on the horizon, as is the post-pandemic society we’ve all been longing for. Of course, we will get there in stages — not all at once — but if we see more economic prints point in the direction of coming inflation going forward, that day may come sooner than many of us had planned.
Industrial Production for January also came in higher than expected, to +0.9% from an estimate of +0.5%. This is off the previous month’s initially reported +1.6%, and these monthly numbers have been dwindling a bit in recent months, but it’s a positive surprise nevertheless. The all-time high in Industrial Production came in June of last year, +6.24%. Capacity Utilization, also for last month, reached 75.6% — the best monthly read since last February. This was up from an expected 74.8% and initially reported 74.5% a month ago.