–January Business Inflation Shows Expected Decline; Claims Elevated
WASHINGTON (MaceNews) – February’s positive narratives were ambushed Thursday by remnants of last year’s most negative month, December, with the retail sales report – delayed a month by the government shutdown – landing with a thud on the markets to show renewed investor optimism is still fragile.
No sooner had the Census Bureau delivered its 1.2% decline for December’s Retail and Food Services report – a worse 1.8% drop without autos – that Dow futures collapsed to a minus 90 points from the positive 50 prior. The yield curve flattened so that the 30-year slipped under 3%, closer to the 10-year’s 2.468%. As credit market prices rallied, the CBOE’s VIX spiked to around 17 from 15.30.
December? That month’s delay for retail sales was because the Commerce Department and its Census Bureau, had to furlough the statisticians during the shutdown, while Labor and its Bureau of Labor Statistics had already been funded and so was spared. That sales decline as large as 1.2%, the biggest drop in nine years, was more of a surprise because major retailers mostly suggested less damage for the month. For 12 months through December, government-measured sales are up 2.3%. Now Walmart’s numbers on Tuesday will be even more closely watched.
So the day’s business inflation report, the Producer Price Index, was on schedule Wednesday and showed an unsurprising 0.1% decline. Core PPI – which used to be called wholesale prices before the report started to incorporate a lot of retail – was up a similarly anticipated 0.2%.
Initial claims, the product of another Labor Department office, showed another week of elevation, up 4,000 to 239,000 after the previous week’s revised 235,000. Whether shutdown aftershocks or something else, claims’ 49-year lows are receding into the past for at least the time being. The four-week average was up 9,000.
White House economic policy coordinator Larry Kudlow appeared before reporters Wednesday morning, responding to the usual cue of a sharply declining stock market in the wake of retail sales. He mostly blamed the “temporary glitch” of a shutdown and late shopping for the retail sales dropoff and said January’s report might include an upward revision. He wouldn’t comment on China talks underway. His net influence seemed positive, with the Dow down less, about 118 points at that hour, and kept stabilizing.
When will that January retail sales update show up? The report said that is still to be determined, as previously furloughed workers catch up with the numbers. The response rates were “at or above normal,” the report said, despite the furloughs. Census is adjusting its schedule for future reports and displays the udpates at https://www.census.gov/economic-indicators/.