Gary Thayer
Gary Thayer
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We did see a big recovery in (producer) prices, but that was primarily in energy. Core prices increased only modestly and that's good news for the Fed.
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The October home sales data were strong, but we are seeing more moderate price increases for new homes suggesting that the housing market is gradually cooling off.
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It's still a good reading overall, but not quite as robust as we've seen in the last several months. The encouraging thing is that the employment component increased again. We are beginning to see businesses becoming a little more willing to hire.
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It's a good number for the economy. Labor markets are improving, and that increases the likelihood that the economy will remain strong.
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This may help increase the inflation-fighting credibility of the Fed before we replace the chairman.
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If you put the two months together it still looks as if retail sales were strong at the beginning of the year -- an average increase of 0.8 percent for each of the two months.
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The increases (in gas prices) looks like it's hitting a critical level.
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The rise in the employment component, combined with the drop in new jobless claims reported earlier today, suggests that employment conditions remain good at the start of the year.
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Energy prices are dropping, and consumer spending is holding up despite rising unemployment . These are encouraging things the market is recognizing.
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Fewer people are worried about jobs right now, more people think that jobs are easy to get, and I think that's supporting confidence despite the high energy prices.
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There's still a lot more inflation fear than there is inflation. There is still concern that the economy could generate inflation at some point but it still doesn't seem to be doing that. The Fed doesn't need to act more aggressively, but it doesn't mean that they won't.
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Productivity numbers on a quarter-to-quarter basis are very volatile. The downwardly revised second-quarter numbers could easily be revised upward in the third quarter.
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We had seen the daily and weekly sentiment surveys show a small dip in consumer attitudes at the end of January. Some of that could have been related to the late January rise in energy prices.
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Confidence is up again -- to the highest level in over two years. Consumers are feeling better not only about current conditions, but also about prospects for the future.