Lending Insight

Factory orders for March: Large increase. April vehicle sales: Nearly unchanged

mmairs — Tue, 03 May 2011 14:51:21 +0000

FNMA 30Yr 4.5% Previous close 102.844 Opened Up 0.09bp @ 102.938 Key Economic Data: EUR / USD 1.4821 Down 0.0010 USD / JPY 80.7290 Down 0.4960 GBP / USD 1.6495 Down 0.1060 Oil 112.01 Down 1.48 Gold 1,542.80 Down 14.30 Key Economic News: 10:00: Factory orders for March: Large increase. The substantial increase in durable goods orders in March impllies a likely gain in overall factory orders. In addition, higher oil prices may lift the nominal value of petroleum shipments. Manufacturing inventory data included in the report could lead to revisions to Q1 GDP. Median ofrecast (of 66): +2.0%; last -0.1%. Afternoon: Lightweight vehicle sales for April: Nearly unchanged. Anecdotel reports from the manufacturers suggest overall vehicle slaes were about unchanged in April. For total sales: median forecast (of 42): 13.0mm; last 13.1mm. For domestic: median forecast (of 18): 9.9mm; last 9.9mm.

Boost Your Savings Account…Case Schiller decline

mmairs — Tue, 26 Apr 2011 15:17:14 +0000

Boost Your Savings Account …Without Even Trying Annual income aside, there’s not a person among us who wouldn’t welcome the idea of having more money in their savings account. This is the money we use on everything from yearly vacations to family presents. Come holiday time, wouldn’t it be nice to have an extra thousand or so dollars at your disposal? Here are a few ideas that can help to make that possible. The best part is you’ll hardly feel it! Bring Your Lunch to Work – The average person spends $6 when they buy their lunch yet only $2 when they pack it themselves. That’s a potential savings of $20 a week or $1,040 dollars a year. Durable over Disposable – Using products like Handi-Wipes (semi-disposable rags) as opposed to paper towels, and a rechargeable razor rather than the disposable kind, can save you up to $200 per year. Hold an Annual Yard Sale – You should have no problem making at least a hundred bucks. Besides, you’ll get rid of all that household clutter in the process. Whatever you don’t sell can be donated to charity and used as a tax write-off. Ask for Discounts – From buying airline tickets to paying a medical bill, always ask if there’s a discount to be had. The worst that can happen is you’ll be told no. Get a Library Card – As opposed to buying a book for $20 or renting a DVD for $4, get it for free. If you average 3 movie rentals a month, you’ll save yourself over $140 a year. Watch Those Utilities – Changing over to energy saving light bulbs and low flow showerheads is a great start. Also, most utility companies offer a home audit you can complete online. If not, go to http://hes.lbl.gov for a virtual inspection of your home. You may be surprised to learn how much energy (and money) you could be saving. The good news is suggestions like these are merely a start. Only you know where your household may be wasting money. Find inefficient habits and figure out a solution. Remember, every little bit counts. The final step is when you save money on something, put the savings into an earmarked account. Then leave it alone until it’s the appropriate time to use it. Do you have any tips on boosting your savings? If so, give me a call and tell me about them!

FNMA 30-Yr 4.5%

Previous close 102.281
Opened Up 0.06bp @ 102.340

Key Economic Data:

EUR / USD 1.4627 Up 0.0045
USD / JPY 81.7340 Down 0.0995
GBP / USD 1.6456 Down 0.0042

Oil 112.37 Up 0.09
Gold 1,505.10 Down 4.00

Key Economic News:

9:00: S&P/Case-Shiller home price index (February): Faster decline. Over the last 2-3 months, the various measures of US house prices (FHFA, Core Logic, Zillow, Radar Logic, Median Existing Home Sales Prices) have deteriorated at an accelerating rate. We expect a similar message from the Case-Shiller report this morning, with the 20-city index falling by 0.3% mom (seasonally adjusted) after a 0.2% decline in January.

Median forecast (of 20): -0.4%; last -0.2%.

10:00: Conference Board confidence index (March): Slight improvement. After last month’s sizable decline, we see room for a partial recovery in the Conference Board’s measure of consumer confidence. An ongoing improvement in labor market conditions may have offset the negative impact of further increases in gasoline prices on household sentiment.

Median forecast (of 68): 64.5; last 63.4.

10:00: Richmond Fed survey (April): Likely still high. Following the very large decline in the Philadelphia Fed’s manufacturing index, the second-tier regional surveys have taken on added importance. Last month the Richmond Fed measure declined slightly, but remained at a high level of 20.0.

Median forecast (of 8): +20; last +20

Silver, Gold and QE2

mmairs — Tue, 19 Apr 2011 15:47:36 +0000

The QE2 smashes into the docks at the end of June. But let’s start here: At the beginning of 2010, a one-ounce silver coin sold for less than $18. At the end of the year, that coin sold for nearly $31. This remarkable gain surely has something important to tell us, especially as gold has been rising at a similar pace and the value of shares of stock has generally been treading water. Meanwhile, interest rates have generally been creeping higher at the longer-term end (10-year T-notes, for example, which 30-year fixed-rate mortgages follow up and down). It seems that most people, looking at all this, have reached a simple conclusion: The markets have gone a bit overboard for precious metals…but this has gone on long enough, taking prices high enough, that we should surely see prices correct sometime soon. Consider, though: While gold and silver have plentiful commercial value as the source of jewelry and in important products like photovoltaic cells, they are—as coins and bullion bars—a form of currency. You can’t walk into most stores and purchase goods with these coins, but you can convert them rather easily into cash. Take this fact seriously. Gold and silver aren’t so much an investment as they are an alternative currency. Their value rises, not coincidentally, when more and more people see them as a superior alternative to, say, dollars. In other words, if the price of gold and silver has climbed this much of late, it is a big vote against the future strength and value of the dollar. Those who are worried that the dollar might begin to lose value—and, indeed, it already has—are protecting their wealth by converting it into precious metals. This is the background, I am guessing, for the gathering storm that may accompany the end of QE2, which will occur on June 30. At that point, the Fed will stop buying up large quantities of longer-term Treasuries; it will no longer support higher demand for the Treasuries, helping to keep rates low; and the market will have to make its way based on actual values and investor decisions, rather than on the propping up provided by the Fed. The last time this happened, when QE1 ended, the stock market indices fell sharply, the dollar’s exchange rate fell, and interest rates rose. Perhaps that is one of the things that the prices of silver and gold have been warning us: When the artificial manipulation of the market is trimmed back, artificially low interest rates will start to rise in a serious way, artificially high stock share prices will decline, and we’ll see more volatility in all market indices. Now, a couple of things need to be considered. First, the price of silver, historically, starts to rise long after the price of gold has made a strong move higher for a while. Thus, the rising price of silver could be telling us that the value of precious metals may soon turn around. Second, we aren’t in a good position to foretell the future movements of interest rates—or of just about anything—since they’ve been manipulated so long by the Fed’s maneuverings. And I guess there’s an obvious third issue: All speculation about silver and gold could simply be wrong. But we’ll know more about that possibility fairly soon into the summer. If the prices of silver and gold do fall, then my concerns about higher interest rates may be unwarranted. If they do not, however, it’s time to watch rates’ swings even more carefully than we usually do. They may swing up…high.

Market Update

mmairs — Tue, 12 Apr 2011 19:36:35 +0000

NMA 30-YR 4.5% NMA 30-YR 4.5% Opened down 0.03bp @ 101.156 NMA 30-YR 4.5% Opened down 0.03bp @ 101.156 Key Economic Data: EUR / USD 1.4506 Up 0.0071 USD / JPY 84.1970 Down 0.4060 GBP / USD 1.6312 Down 0.0034 Oil 107.46 Down 2.56 Gold 1,462.90 Down 5.20 Key Economic News: Less Improvement than expected Trade balance improves less than expected, suggesting downside risk to GDP call. Key Numbers: Trade balance -$45.8bn in Feb vs. median ofrecast -$44.0bn. Import prices +2.7% in March (mom) vs. median forecast +2.1. Main Points: 1. Trade balance improved much less than expected in February, narrowing to -$45.8bn from a revised -$47.0bn in January. The “Chiese New Year effect” was much smaller than expected, with real goods imports declining by $4.5bn but less than half of the change due to manufactured goods imports. Meanwhile, exports were extremely weak, falling $3.7bn in real terms so that the real trade balance improved by less than $1bn. Through February, the trade data suggest a large drag on GDP growth in the first quarter and suggest downside risk to forcast of 2.5%. 2. Separately, import prices increased by 2.7% mom, reflecting increases in prices of fuels, other industrial supplies and materials, and agricultural products. Prices of finished consumer goods excluding autos declined by 0.2% mom after increasing by 0.5% in February. From a year ago, consumer goods import prices are up 0.3%. Prices of imports from China rose by 0.6% mom, the largets one-month gain since July 2008. 14:00: US budget balance for March. The CBO estimates that the March budget deficit increased by $124bn from the same month last year. The deterioration reflects technical factors, rather than a fundamental deterioration in government finances (last March, the Treasury made a one-time accounting change to the projected cost of the TARP). CBO -$189bn; median forecast (of 28) -$189bn; last (March 2010) -$65.4BN. 14:15: Fedral Reserve Governor Daniel Tarullo testifies on regulatory issues. Key Economic Data: EUR / USD 1.4506 Up 0.0071 USD / JPY 84.1970 Down 0.4060 GBP / USD 1.6312 Down 0.0034 Oil 107.46 Down 2.56 Gold 1,462.90 Down 5.20 Key Economic News: Less Improvement than expected Trade balance improves less than expected, suggesting downside risk to GDP call. Key Numbers: Trade balance -$45.8bn in Feb vs. median ofrecast -$44.0bn. Import prices +2.7% in March (mom) vs. median forecast +2.1. Main Points: 1. Trade balance improved much less than expected in February, narrowing to -$45.8bn from a revised -$47.0bn in January. The “Chiese New Year effect” was much smaller than expected, with real goods imports declining by $4.5bn but less than half of the change due to manufactured goods imports. Meanwhile, exports were extremely weak, falling $3.7bn in real terms so that the real trade balance improved by less than $1bn. Through February, the trade data suggest a large drag on GDP growth in the first quarter and suggest downside risk to forcast of 2.5%. 2. Separately, import prices increased by 2.7% mom, reflecting increases in prices of fuels, other industrial supplies and materials, and agricultural products. Prices of finished consumer goods excluding autos declined by 0.2% mom after increasing by 0.5% in February. From a year ago, consumer goods import prices are up 0.3%. Prices of imports from China rose by 0.6% mom, the largets one-month gain since July 2008. 14:00: US budget balance for March. The CBO estimates that the March budget deficit increased by $124bn from the same month last year. The deterioration reflects technical factors, rather than a fundamental deterioration in government finances (last March, the Treasury made a one-time accounting change to the projected cost of the TARP). CBO -$189bn; median forecast (of 28) -$189bn; last (March 2010) -$65.4BN. 14:15: Fedral Reserve Governor Daniel Tarullo testifies on regulatory issues. Opened down 0.03bp @ 101.156 Key Economic Data: EUR / USD 1.4506 Up 0.0071 USD / JPY 84.1970 Down 0.4060 GBP / USD 1.6312 Down 0.0034 Oil 107.46 Down 2.56 Gold 1,462.90 Down 5.20 Key Economic News: Less Improvement than expected Trade balance improves less than expected, suggesting downside risk to GDP call. Key Numbers: Trade balance -$45.8bn in Feb vs. median ofrecast -$44.0bn. Import prices +2.7% in March (mom) vs. median forecast +2.1. Main Points: 1. Trade balance improved much less than expected in February, narrowing to -$45.8bn from a revised -$47.0bn in January. The “Chiese New Year effect” was much smaller than expected, with real goods imports declining by $4.5bn but less than half of the change due to manufactured goods imports. Meanwhile, exports were extremely weak, falling $3.7bn in real terms so that the real trade balance improved by less than $1bn. Through February, the trade data suggest a large drag on GDP growth in the first quarter and suggest downside risk to forcast of 2.5%. 2. Separately, import prices increased by 2.7% mom, reflecting increases in prices of fuels, other industrial supplies and materials, and agricultural products. Prices of finished consumer goods excluding autos declined by 0.2% mom after increasing by 0.5% in February. From a year ago, consumer goods import prices are up 0.3%. Prices of imports from China rose by 0.6% mom, the largets one-month gain since July 2008. 14:00: US budget balance for March. The CBO estimates that the March budget deficit increased by $124bn from the same month last year. The deterioration reflects technical factors, rather than a fundamental deterioration in government finances (last March, the Treasury made a one-time accounting change to the projected cost of the TARP). CBO -$189bn; median forecast (of 28) -$189bn; last (March 2010) -$65.4BN. 14:15: Fedral Reserve Governor Daniel Tarullo testifies on regulatory issues.

Pending home sales for Feb: Possible stabilization

mmairs — Tue, 29 Mar 2011 14:34:32 +0000

FNMA 30-YR 4.5% Previous close 101.719 Opened Down 0.18bp @ 101.531 Key Economic Data: EUR / USD 1.4066 Down 0.0022 USD / JPY 81.6985 Up 0.3557 GBP / USD 1.6000 Down 0.0042 Oil 103.77 Down 1.63 Gold 1,414.40 Down 13.20 Key Economic News: Better, But downside Risk to Q1 remains Consumer spending growth accelerated in February, but the lastest consumption figures are still tracking below our Q1 forecast. Key Numbers: Personal spending +0.7% in Feb (mom) vs. median forecast +0.5%. Personal income +0.3% in Feb (mom) vs. median forecast +0.4%. PCE core price index +0.16% in Feb (mom) vs. median forecast +0.2%. Main Points: 1. Nominal consumer spending increased by 0.7% mom in February, but part of the large increased reflected price gains. Real consumer spending increased by 0.3% mom after an unchanged reading in January. The latest consumption figures point to growth for Q1 as a whole of approximately 1.75% – 2.00% qoq annualized. This compares to our current forecast of +3.0%. The report therefore implies significant downside risk to our Q1 GDP estimate of +3.5% qoq annualized. 2. Nominal personal increase increased by 0.3% in February, slightly less than expected. However, income growth in January was revised up to +1.2% mom from +1.0% previously. Real disposable income fell by 0.1% during the month. 3. The Personal Consumption Expenditures (PCE) price index rose by 0.4% mom or 1.6% yoy, as expected. The core PCE price index rose by 0.2% mom or 0.9% yoy. The monthly growth rate was moderately below our forecast, but nevertheless confirms signs of firming in this inflation gauage. Growth in the market-based core PCE also accelerated to +0.17% mom from +0.12% in January. 10:00: Pending home sales for Feb: Possible stabilization. The pending home sales index cooled in December and January. The weakness likely resulted from inclement winter weather and some payback from strong growth in Q4. Mortgage purchase applications have steadied. Median forecast (of 29): Median forecast unchanged; last -2.8%. 10:30: Dallas Fed manufacturing index for Mar: High level. Like its counterparts in other regions, the Dallas Fed’s index of manufacturing activity should remain elevated this month. Median forecast (of 6): Median forecast +17.6; last 17.5.

Market Volatility Continues

mmairs — Tue, 15 Mar 2011 15:01:52 +0000

FNMA 30-YR 4.5% FNMA 30-YR 4.5% Previous close 102.031 Opened Up 0.49bp @ 102.531 Key Economic Data: EUR / USD 1.3902 Down 0.0091 USD / JPY 80.9205 Down 0.7090 GBP / USD 1.6015 Down 0.0158 Oil 97.96 Down 3.23 Gold 1,392.20 Down 32.70 Key Economic News: No major surprises While the headline index comes in slightly ahead of expectations in March, its composition is on the weaker side as both new orders and shipments decline. Import prices rise more than expected in February. Key Numbers: Empire index +2.07 points to 17.50 in March vs. median forecast +16.10. Import prices 1.4% in Feb (mom) vs. median ofrecast +0.9%. 9:00: TIC data for JAnuary. Median forecast $37.5bn (for long term flows $55.0bn). 10:00: Homebuilders’ survey for March. The monthly housing index from the National Association of Home Builders has been stuck at exceptionally low levels for more than three years. Better weather might help boost the lastest release slightly. Median forecast 17; last 16. 2:15: FOMC statement…threading the needle. Fed officials face a challenge here, as theey will want to acknowledge data that has in some cases been better than expected, while also noting additional risks to the outlook that have emerged in recent weeks. At the margin, the events in Japan over the last few days could persuade them to adopt a slightly softer tone. While the FOMC could choose to acknowldge the small uptick in some measures of inflation, we suspect they will prefer to let this dog lie. Previous close 102.031 Opened Up 0.49bp @ 102.531 Key Economic Data: EUR / USD 1.3902 Down 0.0091 USD / JPY 80.9205 Down 0.7090 GBP / USD 1.6015 Down 0.0158 Oil 97.96 Down 3.23 Gold 1,392.20 Down 32.70 Key Economic News: No major surprises While the headline index comes in slightly ahead of expectations in March, its composition is on the weaker side as both new orders and shipments decline. Import prices rise more than expected in February. Key Numbers: Empire index +2.07 points to 17.50 in March vs. median forecast +16.10. Import prices 1.4% in Feb (mom) vs. median ofrecast +0.9%. 9:00: TIC data for JAnuary. Median forecast $37.5bn (for long term flows $55.0bn). 10:00: Homebuilders’ survey for March. The monthly housing index from the National Association of Home Builders has been stuck at exceptionally low levels for more than three years. Better weather might help boost the lastest release slightly. Median forecast 17; last 16. 2:15: FOMC statement…threading the needle. Fed officials face a challenge here, as theey will want to acknowledge data that has in some cases been better than expected, while also noting additional risks to the outlook that have emerged in recent weeks. At the margin, the events in Japan over the last few days could persuade them to adopt a slightly softer tone. While the FOMC could choose to acknowldge the small uptick in some measures of inflation, we suspect they will prefer to let this dog lie.

Market Update

mmairs — Wed, 05 Jan 2011 19:43:50 +0000

FNMA 30-YR 4.0% Previous close 99.560

Key Economic Data: EUR / USD 1.3161 Down 0.0147 USD / JPY 82.9840 Up 0.9465 GBP / USD 1.5517 Down 0.00070 OIL 88.74 Down 0.64 Gold 1,376.60 Down 2.20

Key Economic News: The Mortgage Bankers Association’s index of mortgage applications rose 2.3% in the final week of 2010 following a 3.9% setback in the prior week. Both figures were released today. The net decline over these two weeks was all in applications for refinancing as the purchase loan index rose 2.3% on balance. However, at alevel of 199.8 (March 16, 1990 = 100), this index is not far off the 14-year low to which it fell last summer. Big Upside Surprise, but may include seasonal distortion ADP reports huge increase in private-sector payrolls in December, concentrated in small and medium-sized firms and in the service sector. Although the report suggests potentially significant upside risk to prevailing estimates of nonfarm payrolls, it also contains statistical “purging” quirks peculiar to December. The employment index in ISM nonmanufacturing report, to be released later this morning, will provide a useful cross check on how seriously to take the ADP results.

Key Numbers: ADP report forecats private sector payrolls +297k vs. median forecast (for ADP) of +100k. The ADP data have a special quirk that could have affected today’s report. ADP records payrolls based on the number of names on the payroll-regardless of how many hours they work during the week. Not every firm immediately “cleans” payrolls whan an employee quits or is laid off, in some cases, it can take until the end of the year for the payroll list to be officially updated. This creates a lot of voliatiliy in the December report in perticular. Of course, the official report attempts to adjust for this behavior, but if 2010 saw relatively less purging, it’s possible some of today’s improvement could be the result of this data quirk rather than genuine acceleration.

10:00: ISM nonmfg index for dec…will it improve? Economists are looking for a slightly larger increase in the ISM’s index of nonmanufacturing activity, which has run uncharacterisitically below its manufacturing cousin throughout the recovery. The employment index has historically been a helpful addition in forecasting payrolls, though last month’s 5-point increase would have given the wrong signal had it been known before the BLS report. Median forecast (of 66): 55.7, ranging from 54 to 58.5; last 55.0.

The technical recovery is still in place

mmairs — Tue, 21 Dec 2010 19:55:03 +0000

FNMA 30-YR 4.0%

Previous close 98.720
Opened Up 0.13bp @ 98.844

Key Economic Data:

EUR / USD 1.3160 Up 0.0029
USD / JPY 83.6145 Down 0.1565
GBP / USD 1.5506 Down 0.0007

OIL 89.31 Down 0.06
Gold 1,384.80 Down 1.30

Key Economic News:

No schedule news again today. The technical recovery is still in place and provided we remain at or near 98, we are positioned to ride this current wave to 100. I wish all the knuckleheads would stop selling into the POMC and soon my wish will come true. Until then, we have to continue to read synthetic tea leaves. Big news day tomorrow…stay alert. Have a great day.

Dollar’s Up, Euro Down, Dow Cannot hold gains

mmairs — Mon, 20 Dec 2010 16:34:10 +0000

FNMA 30-YR 4.0%

Previous close 98.750
opened Up 0.41bp @ 99.156

Key Economic Data:

EUR / USD 1.3157 Down 0.0032
USD / JPY 83.6950 Down 0.2873
GBP / USD 1.5554 Up 0.0022

OIL 88.40 Up 0.38
Gold 1,366.00 Up 6.80

No Econ News until Wed, lots of new on Wed and Thursday.

Double bottom, gap up show classic trend reversal. 4% FM coupon held 98, hit 99, 100 is the next stop. We may go back down to 98.5 but not 98. If we go back down to 98, all bet are off for a bond rally. The Dow is demonstrating most of the classic signs of a market top, the bull is getting tired!

mmairs — Tue, 14 Dec 2010 22:13:03 +0000

FNMA 30-YR 4.0% Previous close 99.310 Opened Down 0.09 @ 99.219 Key economic Data: EUR / USD 1.3421 Up 0.0030 USD / JPY 83.3405 Down 0.0500 GBP / USD 1.5785 Down 0.0077 OIL 88.44 Down 0.17 Gold 1,398.90 Up 0.90 Key Economic News: Very strong spending; PPI up due to Food, Energy, and rebound in Vehicle prices Retail sales rise more than expected in November, as October and September figures are revised up sharply. Report increases upside risks to 2 1/2% call for Q4 growth. Producer price index rises more overall than expected in Nov, but core increase is roughly in line as vehicle prices recover some of October declines. Key Numbers: Retail sales +0.8% in Nov (mom, +9.2% yoy) vs. median forecast +0.6%. Ex autos +1.2% in NOv (mom, +7.9%) vs. median forecast +0.6%. PPI +0.8% in Nov (mom, +3.5% ypy) vs. median forecast +0.6%. Ex food and energy +0.3% in Nov (mom, +1.2% yoy) vs. median forecast +0.2%. Main Points: 1. Headline retail sales rose more strongly than expected in October, pushing up “core” retail slaes (excluding vehicles, building materials, and gasoline) by 0.9%. Morover, September and October core numbers were revised up sharply (by 0.3% and 0.2% points, respectively). Consumer spending thus looks very firm in Q4: retail sales is tracking at an annualized rate of around 8 1/2% into the fourth quarter. 2. The Producer price index was firmer than expected overall, but with a bit less of a rebound in the core index than we had anticipated. The upside surprise in the headline was in food prices (+1.0% on the month, not annualized) while the modest downside surprise in the core was that vehicle prices retraced a smaller percentage of their October declines than we expected. Inflation pressure from commodity price increases are evident deeper in the production pipeline as the core index for intermediate (i.e., partly processed) goods rose 0.7% in November. This follows a 0.6% increase in October. That said these presures have generally not passed forward into finished producer goods and to retail prices in recent years. 10:00: Business inventories for Oct…another significant increase? The median forecast implies a 0.3% increase in retail inventories given the increase reported for manufacturing (+0.9%) and wholesale (+1.9%). This would be smallest increase in six months for that component. Risks lie to the side of a larger increase. Median forecast (of 41): +1.0%, ranging from +0.1% to +1.5%; last +0.9%. 14:15: FOMC statement…no major changes. The statement following the Federal Open Market Committee (FOMC) meeting on Tuesday is likely to be least interesting of the year. We expect only a very modest “lean” in the direction of better data. Kansas City Fed President Hoenig will probably cast his eigth consecutive dissent against the current poliFNMA 30-YR 4.0% Previous close 99.310 Opened Down 0.09 @ 99.219 Key economic Data: EUR / USD 1.3421 Up 0.0030 USD / JPY 83.3405 Down 0.0500 GBP / USD 1.5785 Down 0.0077 OIL 88.44 Down 0.17 Gold 1,398.90 Up 0.90 Key Economic News: Very strong spending; PPI up due to Food, Energy, and rebound in Vehicle prices Retail sales rise more than expected in November, as October and September figures are revised up sharply. Report increases upside risks to 2 1/2% call for Q4 growth. Producer price index rises more overall than expected in Nov, but core increase is roughly in line as vehicle prices recover some of October declines. Key Numbers: Retail sales +0.8% in Nov (mom, +9.2% yoy) vs. median forecast +0.6%. Ex autos +1.2% in NOv (mom, +7.9%) vs. median forecast +0.6%. PPI +0.8% in Nov (mom, +3.5% ypy) vs. median forecast +0.6%. Ex food and energy +0.3% in Nov (mom, +1.2% yoy) vs. median forecast +0.2%. Main Points: 1. Headline retail sales rose more strongly than expected in October, pushing up “core” retail slaes (excluding vehicles, building materials, and gasoline) by 0.9%. Morover, September and October core numbers were revised up sharply (by 0.3% and 0.2% points, respectively). Consumer spending thus looks very firm in Q4: retail sales is tracking at an annualized rate of around 8 1/2% into the fourth quarter. 2. The Producer price index was firmer than expected overall, but with a bit less of a rebound in the core index than we had anticipated. The upside surprise in the headline was in food prices (+1.0% on the month, not annualized) while the modest downside surprise in the core was that vehicle prices retraced a smaller percentage of their October declines than we expected. Inflation pressure from commodity price increases are evident deeper in the production pipeline as the core index for intermediate (i.e., partly processed) goods rose 0.7% in November. This follows a 0.6% increase in October. That said these presures have generally not passed forward into finished producer goods and to retail prices in recent years. 10:00: Business inventories for Oct…another significant increase? The median forecast implies a 0.3% increase in retail inventories given the increase reported for manufacturing (+0.9%) and wholesale (+1.9%). This would be smallest increase in six months for that component. Risks lie to the side of a larger increase. Median forecast (of 41): +1.0%, ranging from +0.1% to +1.5%; last +0.9%. 14:15: FOMC statement…no major changes. The statement following the Federal Open Market Committee (FOMC) meeting on Tuesday is likely to be least interesting of the year. We expect only a very modest “lean” in the direction of better data. Kansas City Fed President Hoenig will probably cast his eigth consecutive dissent against the current policy stance. 17:00: ABC consumer comfort index…It’s been stuck between -47 and -45 since mid-September, last at -45.cy stance. 17:00: ABC consumer comfort index…It’s been stuck between -47 and -45 since mid-September, last at -45.