- CPI Ex Food & Energy for October rose .1% versus estimates of a .2% increase and a .2% rise in September.
- Initial Jobless Claims for last week fell to 308K versus estimates of 311K and 310K the prior week.
- Continuing Claims remained at 2443K versus estimates of 2430K and 2443K prior
- Industrial Production for October rose .2% versus estimates of a .3% increase versus a -.6% decline in September.
- Capacity Utilization for October rose to 82.2% versus estimates of 82.0% and a reading of 82.1% in September.
- Philly Fed for November rose to 5.1 versus estimates of 5.0 and a reading of -.7 in October.
BOTTOM LINE: Consumer prices in the US fell in October for the second consecutive month, reflecting cheaper energy costs and adding to evidence that inflation pressures are easing, Bloomberg said. Drops in airline fares and the biggest fall in natural gas prices on record helped. Consumer Prices rose 1.3% year-over-year, the smallest increase since June 2002. Gasoline prices plunged 11.1% on top of a 13.5% decline the prior month. The CPI is the government’s broadest measure of the costs of goods and services. So far this year, the CPI is increasing at a 2.4% rate, well below the long-term average of 3%, versus a 5.0% gain during the first 10 months of 2005. This very good inflation reading joins the PPI, which recently matched the largest monthly decline in US history. As I said several months ago, I continue to believe inflation has peaked for this cycle and it is not a problem. Modest inflation and moderate growth provide a very good backdrop for stocks as p/e multiples expand.
The number of Americans filing first-time claims for jobless benefits fell last week, indicating the labor market is still healthy, Bloomberg said. The four-week moving-average of jobless claims rose to 313,750 from 311,750 the prior week. Average monthly payroll increases are running ahead of last year’s pace so far this year and the unemployment rate is at historically low levels. The unemployment rate for those eligible to collect benefits, which tracks the US unemployment rate, remained at 1.9% last week. I continue to believe the labor market will remain healthy over the intermediate-term without generating sustained substantial unit labor cost increases.
Industrial Production in the US rose last month, boosted by a rebound in utilities and gains at computer and electronics manufacturers, Bloomberg said. Unseasonably cool temperatures raised demand for heating and computer manufacturers gained from increasing orders as businesses update equipment. Manufacturing production, which accounts for four-fifths of output, declined .2% for the second month in a row due to a 3.9% slump in auto production. Utility production jumped 4.1% as US temperatures in October were .9 degrees cooler than normal during October. Production of business equipment rose .7% versus a .2% fall in Sept, spurred by a 1.2% gain in computer production and a 2.5% increase in semiconductors. I expect industrial production to begin improving next year as auto production cutbacks subside.
Manufacturing in the Philadelphia region expanded for the first time in three months as costs eased and shipments rose, Bloomberg said. The report shows manufacturing, which accounts for about 12% of the US economy, is holding up despite the housing slowdown and auto production cutbacks. The price paid component of the index fell to 26.7 versus 32 the prior month. The prices paid component has plunged 60.0% from October 2005 highs. The unfilled orders component of the index rose to -3.9 from -11.1 the prior month. The new orders component fell to -3.7 from 13.4 the prior month. The expectations component declined to 12.4 from 16.7 prior. I expect manufacturing to strengthen next year as auto production cutbacks subside and companies restock inventories as confidence improves with respect to the sustainability of the current expansion.