More economic data for January has hit the tape this morning, with both Retail Sales and Import/Export Prices well ahead of expectations. While this speaks to inflation further breaking away, one nice thing we saw earlier this morning is how well pre-market trading took this news: the Dow had been -66 points ahead of these reports, the Nasdaq -44 and the S&P 500 -11 points; all these major indexes went roughly flat minutes later.
Retail Sales last month rose to +3.8% — a big swing from the previous month’s downwardly revised -2.5%, and even much stronger than the +2.1% analysts had been anticipating. Similarly, the ex-autos Retail Sales data was +3.3% from a more deeply revised -2.8%, and 4x higher than the +0.8% expected. Everyone had been expecting an auto sales bounce-back; we got an auto sales explosion.
Stripping out both auto and gasoline sales, we go right back up to +3.8% — a clear sign of the widespread nature of inflation in our current economy. And if these figures begin to prompt one to think how the Fed is absorbing this data, the Control number — which works its way higher up the economic food chain — came in at a whopping +4.8%. These figures are not adjusted for inflation, by the way; what we’re seeing is a combination added purchases as well as higher price points.
Import Prices, also reported this morning for January, reached +2.0% — 80 basis points ahead of expectations — from a downwardly revised -0.4% in December. As we saw in Retail Prices, December numbers were weak, so a bounce-back is not a surprise — but the amount of surprise is. Ex-petrol, we see +1.4%, with year-over-year +10.8%. Combine this with the CPI, PPI and other economic data recently putting out year-over-year figures at or near record highs, and its more grist for the inflation story.
Exports doubled expectations to +2.9% in January, demonstrating these inflation metrics work both ways. Year over year, this figure comes to an extraordinary +15.1%, though it’s not even a record high. We saw Exports reach that mark last October, at +18.3%.
So pre-market activity brought index levels flat initially, but just in the course of writing these short paragraphs, we’re back at early trading lows: the Dow -140 points, the Nasdaq -90 and the S&P 500 -20 points. Is the 50-basis-point rate hike expected mid-March now giving way to something more drastic, in order to sop up more of this inflation quicker? And what would such a shock do to the economy?
Certainly, ratcheting up interest rates is the right move; the question right now is: how fast does the Fed wish to play catch-up? Keep in mind January data also has peak Omicron to have dealt with, and some economists see this data as likely the peak of the parabolic inflation curve. If this is true, then raising rates by half a point to 0.50-0.75% and seeing what happens from there still looks to be the prevailing viewpoint.
Don’t forget that later today we’ll also get the Fed minutes from the latest FOMC meeting back in late January. What we heard from Fed Chair Jay Powell back then was that tapering was definitely concluding and it was potentially to be immediately followed by a quarter-point rate hike. Since then, data has raised the odds for a stronger tightening — but how many Fed members were calling for it back then, and how hard were they hollering? The answers should come at 2:30pm ET today.
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U.S. Retail Sales Surge in January
More economic data for January has hit the tape this morning, with both Retail Sales and Import/Export Prices well ahead of expectations. While this speaks to inflation further breaking away, one nice thing we saw earlier this morning is how well pre-market trading took this news: the Dow had been -66 points ahead of these reports, the Nasdaq -44 and the S&P 500 -11 points; all these major indexes went roughly flat minutes later.
Retail Sales last month rose to +3.8% — a big swing from the previous month’s downwardly revised -2.5%, and even much stronger than the +2.1% analysts had been anticipating. Similarly, the ex-autos Retail Sales data was +3.3% from a more deeply revised -2.8%, and 4x higher than the +0.8% expected. Everyone had been expecting an auto sales bounce-back; we got an auto sales explosion.
Stripping out both auto and gasoline sales, we go right back up to +3.8% — a clear sign of the widespread nature of inflation in our current economy. And if these figures begin to prompt one to think how the Fed is absorbing this data, the Control number — which works its way higher up the economic food chain — came in at a whopping +4.8%. These figures are not adjusted for inflation, by the way; what we’re seeing is a combination added purchases as well as higher price points.
Import Prices, also reported this morning for January, reached +2.0% — 80 basis points ahead of expectations — from a downwardly revised -0.4% in December. As we saw in Retail Prices, December numbers were weak, so a bounce-back is not a surprise — but the amount of surprise is. Ex-petrol, we see +1.4%, with year-over-year +10.8%. Combine this with the CPI, PPI and other economic data recently putting out year-over-year figures at or near record highs, and its more grist for the inflation story.
Exports doubled expectations to +2.9% in January, demonstrating these inflation metrics work both ways. Year over year, this figure comes to an extraordinary +15.1%, though it’s not even a record high. We saw Exports reach that mark last October, at +18.3%.
So pre-market activity brought index levels flat initially, but just in the course of writing these short paragraphs, we’re back at early trading lows: the Dow -140 points, the Nasdaq -90 and the S&P 500 -20 points. Is the 50-basis-point rate hike expected mid-March now giving way to something more drastic, in order to sop up more of this inflation quicker? And what would such a shock do to the economy?
Certainly, ratcheting up interest rates is the right move; the question right now is: how fast does the Fed wish to play catch-up? Keep in mind January data also has peak Omicron to have dealt with, and some economists see this data as likely the peak of the parabolic inflation curve. If this is true, then raising rates by half a point to 0.50-0.75% and seeing what happens from there still looks to be the prevailing viewpoint.
Don’t forget that later today we’ll also get the Fed minutes from the latest FOMC meeting back in late January. What we heard from Fed Chair Jay Powell back then was that tapering was definitely concluding and it was potentially to be immediately followed by a quarter-point rate hike. Since then, data has raised the odds for a stronger tightening — but how many Fed members were calling for it back then, and how hard were they hollering? The answers should come at 2:30pm ET today.