Energy and Weather Dominate Data on the First Day of Open-Ended QE
- August Retail Sales increased by 0.9 percent, boosted by higher gasoline prices.
- Ex-auto Retail Sales gained 0.8 percent. Motor vehicles and parts sales increased by 1.3 percent.
- The Consumer Price Index for August surged by 0.6 percent, the largest monthly gain since June 2009.
- Industrial Production fell by 1.2 percent in August, dampened by Hurricane Isaac.
- The University of Michigan Consumer Sentiment Index for September jumped to 79.2.
- Business inventories for July increased nominally by 0.8 percent.
Financial markets are still digesting the Federal Reserve’s announcement of a new open-ended program of mortgage-backed securities purchases dubbed QE3. The spate of U.S. economic data from today certainly does not reflect the new era of “QE until we stop”; however it does show the still strong influence of oil prices on the U.S. economy. Going forward it is reasonable to expect that oil and other commodity prices will get a nudge from QE3. The price for NYMEX crude oil jumped about $2 yesterday to approach $100/barrel after the Fed released its policy announcement. Retail sales for August increased by 0.9 percent, boosted by higher gasoline prices and by the pop in car sales, back up to a 14.5 million unit rate. The national average gasoline price cruised up through August, and now sits at $3.87/gallon according to AAA. Retail sales at gasoline stations ignited in August, gaining 5.5 percent. Retail sales of motor vehicles and parts revved up by 1.3 percent in August. Sales were flat in most other categories, with the exception of building materials, which gained 1.0 percent, possibly spurred by Hurricane Isaac.
The consumer price index for August showed the largest monthly gain in more than three years, up 0.6 percent. The energy index was up 5.6 percent, reversing four months of decline. Consumer food prices were sedate, up 0.2 percent. However, yesterday we did see a stronger 0.9 percent gain in the producer price index for finished foods. The core CPI (excluding food and energy) was calm, up just 0.1 percent in August. U.S. industrial production fell by 1.2 percent in August as Hurricane Isaac disrupted the Gulf Coast region. The Federal Reserve estimates that Isaac knocked 0.3 percent off of industrial production for the month. Overall capacity utilization fell to 78.2 percent. The preliminary University of Michigan consumer sentiment index for September jumped to 79.2 percent, still a subdued number, but well above the August reading of 74.3 percent. Business inventories for July were up 0.8 percent for the month. The headline inventory-to-sales ratio ticked down in July after increasing through the second quarter.
Market Reaction: Equity markets opened with gains. Treasury yields are up at the long end of the yield curve. NYMEX crude oil is up to $99.89/barrel. The dollar is up against the yen and down versus the euro.
Click here for a PDF version of the Comerica Economic Alert: Retail Sales 091412.