Daily Commentary by Larry Baer: Better-than-expected July retail sales figures
combined with hotter-than-expected readings on inflation pressures at the
producer level to shove mortgage interest rates fractionally higher today.
U.S. retail
sales rose in July for the first time in four months as demand picked-up
strongly for everything from cars to paper towels. The pace of retail sales was higher by 0.8%
on a month-over-month basis in July.
Excluding vehicle sales, consumers pushed purchases 0.8% higher - a
major shift in direction from June's 0.5% plunge.
The numbers are the numbers - but all the
excitement around the July retail sales gains looks "squirrely" to
me. I find it hard to believe the July
retail sales "power-bump" is anything else than a one-off adjustment
related to the outsized 0.7% sales pace plunge in June.
I think it is worth noting the pace of sales
in July was the strongest since February - a time when the economy was creating
250,000 private sector jobs on a three-month moving average basis - compared
with the current three-month moving average of 105,000 jobs. The three-month moving average for hourly
earnings gains has remained constant at 1.6%.
I don't know about you - but I don't see anything here that even
remotely suggests the consumer currently has the long-term buying power (income
or credit) to fuel a consumption driven economic recovery. If my assessment proves accurate, calmer,
cooler heads may consider using today's sell-off in the mortgage market as a
buying opportunity - particularly if tomorrow morning's consumer price index
numbers fall reasonably close to the consensus forecasts calling for a 0.2%
gain in both the headline and "core" values.
In a separate report, the pace of producer
inflation at the nation's farms, factories and utilities climbed at a
stronger-than-expected 0.3% pace last month.
Excluding the more volatile food and energy components, the so called
"core rate" of producer inflation was up 0.4%, marking its strongest
advance since January.
For the time being this morning's outsized
gains in both the pace of Retail Sales and the growth rate of inflation
pressures at the producer level have, at least temporarily, reduced the
likelihood the Fed will launch a big bond buying initiative (QE3) at their
upcoming September meeting.
Be patient - be disciplined - and play it by
the numbers outlined above.
THE MARKET IS ALWAYS
RIGHT! . YOU AND I ARE SOME OF THE TIME
