Consumer Price Index News Release

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The latest Consumer Price Index news release (http://www.bls.gov/news.release/pdf/cpi.pdf) was issued today by the Bureau of Labor Statistics. Highlights are below.
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On a seasonally adjusted basis, the CPI-U increased 0.5 percent in February after rising 0.4 percent in January. Theindex for all items less food and energy rose 0.2 percent in February, the same increase as in January.

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CPI

The CPI is the Consumer Price Index, a measure of the rate of change in the average price of a fixed basket of goods and services purchased by consumers. This is one of the major measures of inflation and, as such, is split into two primary components: CPI and CPI less food & energy[1]. these are pretty much what they sound like.

For January, the CPI-U came in at 0.4% (slightly worse than expected). Meanwhile, the "core" CPI-U came in at a mildly disappointing 0.2%. Energy costs rose 2.1%, but energy service costs declined 0.6%. Looking to February, the Econoday-surveyed analysts are expecting CPI-U to rise another 0.4%, with "core" CPI-U rising at only 0.1%.

With all that in mind, we turn to the US Bureau of Labor Statistics for the CPI Summary. In February, the CPI-U increased by 0.5% (missing expectations), and the "core" CPI-U rose 0.2% (also missing expectations). Energy rose 3.4% for the month (with gasoline up 4.7% and fuel oil up 5.8%), and food rose 0.6%.

[1] I believe I made my weekly vitriolic observations about "core" inflation measures yesterday when I discussed the PPI. In order to spare everyone, I'll refrain from repeating myself.

Consumer Price Index News Release

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The latest Consumer Price Index news release (http://www.bls.gov/news.release/pdf/cpi.pdf) was issued today by the Bureau of Labor Statistics. Highlights are below.
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On a seasonally adjusted basis, the CPI-U increased 0.4 percent in January, the same increase as in December. The index for all items less food and energy rose 0.2 percent in January after rising 0.1 percent in December.

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News releases archives: http://www.bls.gov/schedule/archives/all_nr.htm
To subscribe or unsubscribe to BLS news releases please visit http://www.bls.gov/bls/list.htm
For help, email news_service@bls.gov
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CPI and Jobless Claims

We've got a few major indicators coming out today. Right now we have CPI and First Time Jobless Claims, and then we'll be getting the Philadelphia Fed Survey at 10 AM.

CPI for December was ever so mildly disappointing. For the month it was up 0.5% (missing expectations by 10 bps), and core CPI was up 0.1% (missing expectations by 10 bps as well). The analysts - or, at least, the analysts surveyed by Econoday - are feeling optimistic about January. They're looking for growth in CPI to slow to only 0.3%, and for growth in core CPI to remain steady at 0.1%.

Turning to first time jobless claims, we had pretty good results for the week ending 2/5. Analysts were looking for 412,000 new claims and we actually came in at 383,000 claims. Even looking at the unadjusted numbers for first time claims (438,548), and at the insured unemployment level (3,888,000 seasonally adjusted, 4,579,513 unadjusted), things were pretty good. For the week ending 2/12 the Econoday-surveyed analysts aren't as optimistic. They're anticipating an upswing in seasonally-adjusted claims, rising to 410,000.

Are they right? Let's have a look.

As always, we turn to the US Bureau of Labor Statistics for Consumer Price Index data. The report shows the CPI-U (the Consumer Price Index for All Urban Consumers, aka the CPI everyone talks about) rising a seasonally-adjusted 0.4% in January. Stripping away food and energy, and just looking at the core CPI-U, we're still up 0.2%. So both missed expectations. Not by a huge amount in absolute numbers (10 bps in both cases), but enough that the Street might not be happy. A few other interesting points:

• Energy was up 2.1% in January, less than December but still pretty noticeable. Most of that was driven by fuel oil, which was up 6.8% on the month.
• On the other hand, energy services prices as a whole were down 0.6%. Just speculating, it may be that people are trying to conserve more because of increased energy costs. But the report doesn't really say one way or the other.
• Clothing costs were up 1.0%.

First time jobless claims data comes from the US Department of Labor. Their press release tells us first that 2/5's initial jobless claims were revised upwards to 385,000, an increase of 2000. Not great - it really isn't good any time this number goes up - but that's a drop in the bucket sort of increase. For 2/12, the advance seasonally adjusted claims are 410,000. That's right in line with expectations, so that's not bad at all. The insured unemployment rate remained level at 3.1%, with the seasonally adjusted insured unemployment level rising from last week's revised 3,910,000[1] to a new level of 3,911,000.

Looking at the unadjusted numbers, first time claims came in at 421,713, while the insured unemployment level came in at 4,544,310. That looks pretty good, although we'll need to see the Employment Situation report (due out later this month) before we can tell if that decline is from people getting back to work, or if it is due to people running out of benefits.[2]

So there you go. I'll be back at ten with the Philadelphia Fed Survey.

[1] Yes. That was revised upwards as well.

[2] Here's hoping it's due to people getting back to work.

Canada Has An Economy Too, Folks

And why should we care? We should care because Canada is the single largest trading partner the United States has. Our total trade[1] with Canada, for October alone, was $45.48 billion[2]. So it strikes me as just slightly important to pay attention to how they're doing.

Canada's CPI for November, and their retail sales figures for October, are out now. In October, Canadian CPI was up 0.7% for the month (and 2.4% for the rolling year). Expectations going in to this morning were an additional 0.3% increase for November (with the rolling year declining to a 2.3% increase). Meanwhile, Canadian Retail Sales were up a revised 0.4% in September (up 3.3% for the rolling year) with expectations for a slightly better October (up 0.5%).

How did our neighbors to the north fare? The CPI was up only 0.2% (2.0% for the rolling year), with 7 of the 8 CPI components increasing in cost[3]. The good news, for certain cynical values of "good", is that the core CPI was absolutely unchanged[4]. Turning to Retail Sales, October saw a 0.8% increase (maintaining the 3.3% rolling year increase).

[1] Defined here as the sum of exports and imports. Why the US Census Bureau doesn't break those out separately, I don' t know.
[2] China, our second largest trading partner, was only $44.12 billion.
[3] The exception was clothing and footware, which were down 3.2%.
[4] The Bank of Canada excludes the following extremely volatile consumer goods from their calculation of the core CPI: fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; heating oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers' supplies.

Everything Is More Expensive, But CPI And Industrial Production Will Still Be Counted A "Win"

We've got two major market movers for today - Consumer Price Index (CPI) and Industrial Production. The first tells us the overall change in the cost of living for consumers (i.e. everyone) and the second tells us about the rate of change in, well, industrial production.

Last month[1], the CPI was up a moderate 0.2%[2] while industrial production showed us a whopping 0.00% change. Will things be better this month? Let's find out.

Analysts were expecting an additional month of 0.2% increase in CPI (with a 0.1% increase in the core), and 0.4% increase in industrial production (with a capacity utilization rate of 75.1%). The reality?

The reality for the Consumer Price Index is a 0.1% increase, with the same increase showing up even after excluding food and energy costs. Groceries (well, "food at home") saw a 0.2% increase, while eating out saw a 0.3% increase. Energy costs went up across the board, with a 0.7% increase in gasoline costs, and a 4.2% increase in fuel oil costs.

And Industrial Production? Up 0.4%, with capacity utilization at 75.2%. Most of the losses came from final products, specifically consumer goods final products (down 0.5%), while business equipment and nonindustrial supplies were the big winners (each category up 0.9%).

All in all, the market will see this as a minor win. Both measures beat expectations, after all. Just try not to think too hard about how things are 1.1% more expensive than November 2009.

[1] October. These are lagging indicators, after all.
[2] Or 0.00% if you look at "core" CPI. I won't rehash that argument today.

Jobless Claims, the Philadelphia Fed's Business Outlook Survey, And An Addendum To Yesterday

First, the addendum.

One of my readers, pointed out to me that I may have been a little... one-sided, or perhaps unfair, about core CPI. I'll let him speak for himself, because he put it very well: "As a long term statistical measure of inflation, including statistical outliers does not make sense. The core prices are not as heavily influenced by outside factors such as currency fluctuation, natural disasters, or political pressures as food and fuel. So from the standpoint of helping [the casual reader] understand the significance of changes in CPI, I understand why you'd reference the buying power of someone's paycheck. We can all understand how the price of a tank of gas changes wildly over a 6 month period, this is a given. But from a long term perspective, volatile food/energy prices can lead to a misleading measure of inflation."

I'll go on record as saying that I think the inclusion of the volatile food and energy prices gives a more accurate measure of inflation, but I will also go on record as saying that's one of those things that real economists have been arguing about for decades. So don't feel like you have to accept my opinion. And thanks to the reader for pointing all of this out.

Now. On to the metrics.

First out of the gate are first time jobless claims. These aren't a really huge market mover, not like the Employment Situation report, because all it shows is how many people filed for unemployment insurance for the first time. It doesn't really say anything about how many people left the unemployment rolls (due to finding employment or running out of benefits) or what the unemployment rate is. It's still interesting, because a rising trend is still bad, but it's not an earthshaker.

For the week ending 11/06, we saw 435,000 new jobless claims. Analysts are looking for 445,000 claims for the week ending 11/13 - an upward trend if accurate, but not terrible. The actual results will be near the bottom of the article.

The other metric is the Philadelphia Fed's Business Outlook Survey, also known as the Philadelphia Fed Index. It's a survey of manufacturers in the Philadelphia, New Jersey, and Delaware about general business conditions. The results use zero as a centerline, with anything greater than zero indicating growth and anything below zero indicating contraction. For October we saw a tepid result of 1.0, and for November the analysts are expecting a 5.6 - still weak, but improving. Investors like this because it's considered an indicator of manufacturing sector trends. And growth in the manufacturing sector helps drive growth across the economy.

Look for the Philly Fed Index at 10 AM.

How did we actually do with first time jobless claims? 439,000. That's up from the prior week, but it beat expectations by about 6000 claims. You can see the details in the Department of Labor's official report.

Stocks little changed as banks offset retail stocks

By Leah Schnurr
NEW YORK (Reuters) - Stocks ended little changed on Wednesday with indexes unable to recoup recent losses as banks wilted on worries about Federal Reserve regulation of the sector going forward.

Indexes also suffered from the continued uncertainty of Ireland's financial crisis, which contributed to Wall Street's drop of nearly 2 percent on Tuesday.

"I think the market is in a deterioration trend. It's worrisome at this point, considering that we had a selloff yesterday with pretty big volume and poor advance-decline numbers," said Frank Gretz, market analyst and technician at the Shields & Co brokerage in New York.

"The market is certainly vulnerable, and I think it is in fact headed for a correction."

Financials sagged after the Federal Reserve said it will allow some banks to increase dividends but would also evaluate the ability of 19 large institutions to withstand losses in "adverse" economic scenarios.

The KBW bank index gave up 1.4 percent. Regional bank KeyCorp (KEY:$7.6800,$-0.3000,-3.76%) slid 3.8 percent to $7.68 after Credit Suisse downgraded its shares.

Volume was light and some of the day's quietness was due to investors awaiting the pricing of General Motors' initial public offering after the market's close, said Nick Kalivas, senior equity index analyst at MF Global in Chicago.

The automaker set the terms for a landmark IPO that could be the largest in U.S. history, raising up to $22.7 billion.

"There's a feeling a lot of money has been sucked out of the market to go pay for that. Once that gets out of the way, that theory's going to be put to the test," said Kalivas.

The Dow Jones industrial average was off 15.62 points, or 0.14 percent, to 11,007.88. The Standard & Poor's 500 Index edged up 0.25 point, or 0.02 percent, at 1,178.59. The Nasdaq Composite Index added 6.17 points, or 0.25 percent, to 2,476.01.

Retailers kept a floor under the market as discount chain Target Corp (TGT:$55.6200,$2.0800,3.88%) rose 3.9 percent to $55.62 after it forecast its best same-store sales in three years during the upcoming holiday season. The S&P consumer discretionary group rose 0.7 percent.

Investors kept a close eye on the situation in Ireland. Dublin agreed to work with a European Union-International Monetary Fund mission on urgent steps to shore up its shattered banking sector, a process that could lead to a bailout despite Ireland's deep reluctance.

The CBOE Volatility index , Wall Street's so-called fear gauge, declined 3.6 percent but remained above 20. On Tuesday, it closed at its highest point in more than a month.

In the latest U.S. economic data, housing starts slumped to their lowest level in more than a year in October, while consumer prices rose, but the annual increase in core CPI was the smallest on record.

(Reporting by Leah Schnurr; Additional reporting by Angela Moon; Editing by Kenneth Barry)

The Envelope, Please...

The numbers are now in, so let's see how things shape up.

First off, CPI. Remember how we were looking for a 0.4% increase (0.1% core increase)? Well, the official report shows only a 0.2% increase (and no change in the core). The good news here is that inflation didn't destroy as much of your wealth in October. The bad news is that fuel and electricity hurt your pocketbook. But we beat expectations, and the Street likes that sort of thing. If you want to drill into the details, you can find them on the Bureau of Labor Statistics Consumer Price Index page.

Housing starts got beat like a jobber, though. We were looking for 590,000 new starts for October, and we only saw 519,000. That's... well, that's not great. But we did see a 1% increase in building permits, so things are looking up for future months. More details can be found on the US Census Bureau's website.

CPI and Housing Starts

What is on the agenda for the day? CPI and Housing Starts, that's what's on the agenda.

The CPI, also known as the Consumer Price Index, represents... well, not to put too fine a point on it, it represents inflation. The CPI looks at how much buying power your salary has lost the previous month. Ahem. I mean, it looks at how much the cost of a fixed basket of goods and services that consumers would purchase has increased. While the "core" CPI looks at exactly the same thing, except that it cuts out volatile components of the basket like food and energy. Because, after all, how important are food, electricity, and gas to consumers? Really?

Anyway, CPI increased by a meager 0.1% in September while core CPI did not change in the slightest. The analysts aren't so optimistic for October; they're calling for a 0.4% increase, with a 0.1% increase in the core.

Why should you care? Well, it all gets back to that "two-thirds of GDP is driven by consumer spending" concept. If prices go up, consumers are able to buy less, and overall consumption goes down. This has a negative effect on GDP, particularly from a Keynesian economic perspective: spending good; savings bad [1].

Housing Starts are, well, exactly what they sound like. They're the number of residential construction projects that have broken ground during the month. September saw 610,000 starts. The analysts are expecting only 590,000 starts for October; that makes a certain amount of sense to me, given that it's October we're talking about here. That doesn't strike me as prime building season in the temperate climate most of the United States calls home.

But why should you - indeed, anyone - care? Three words: trickle down economics, baby. It's called voodoo economics when a President proposes it through tax cuts, but it's solid economics when it comes to home construction. Building a new house needs lumber, and copper pipe, and drywall, and paint, and shingles, and insulated copper wire, and a thousand other things. Then there's carpet, hardwood flooring, tiles, and appliances. Then, when the house is sold there's new furniture, lawn care products, insurance, and all the various and sundry things that transform a house into a money pit... I mean into a rapidly devaluing investment. Damnit, I mean into a home.

[1] Grossly simplified, actually, but correct in broad strokes.

Wrapping Up A Miserable Day In The Market

As of right now, I'm sitting here looking at

• A Dow down 178.47 (1.59%)
• A NASDAQ down 43.98 (1.75%)
• A S&P 500 down 19.41 (1.62%)

That's pretty sad. What drove it? Funny as it would be to blame Apple's partnership with the Beatles, that's not really it. So what is? Well, here's some highlights from today's news:

• Ireland, one of the PIIGS, is unwilling to accept a bailout for it's financial system.
• In comedic counterpoint to the above, some EU members are unwilling to give a bailout.

(And does anyone else hear the dynamics of an elementary school in this? "I don't wanna bailout!" "Yeah, well we don't wanna give you a bailout!" "Yeah? Well I didn't want it first!" "Did not!" "Did too!")

• Austria is threatening to withhold the next tranche of bailout funds from Greece, unless Greece gets back to following it's deficit-cutting plan.

(Accountability. The horror!)

• China is requiring banks to increase their capital reserves, and is tightening up it's lending policies.

So yeah, the pain is all about the financial sector. Still. That seems an ill omen for tomorrow's CPI and housing starts figures (analysts are already looking for a 0.4% month-over-month increase in CPI, and a 20k drop in housing starts). Brace yourself.