CPI and Retail Sales Knock the Market

Wall Street had been nervous going into this morning because today brought the CPI report for January and the retail sales report.

As it turned out, both were bad. The Dow futures lost 500 points in the blink of an eye. The dollar surged and Treasury yields dropped.

Consumer prices rose 0.5% last month while the core rate was up 0.3%. Both numbers were 0.1% higher than expectations.

The WSJ:

The increase in inflation last month was largely driven by higher prices for gasoline, shelter costs like rent, medical care, food and apparel.

Wednesday’s report showed wage inflation was broadly muted. Real average weekly earnings fell a seasonally adjusted 0.8% in January and were up 0.4% from January 2017.

The report showed overall inflationary pressures are intensifying, and it comes five weeks before Federal Reserve officials’ next scheduled policy meeting in Washington on March 20-21.

Central bank officials have been monitoring the inflation picture closely, looking for signs that a tightening labor market and continued economic growth are generating stronger wage and price increases after years of weak inflation.

This was the highest monthly headline inflation in five years.

The Japanese yen is at an 18-month high:

This was the highest core inflation report in close to 13 years.

Retail sales fell 0.3% last month. That was the biggest drop in 11 months.

The Commerce Department said on Wednesday that retail sales decreased 0.3 percent last month, the largest decline since February 2017. Data for December was revised to show sales unchanged instead of rising 0.4 percent as previously reported.

Economists polled by Reuters had forecast retail sales climbing 0.2 percent in January. Retail sales in January rose 3.6 percent from a year ago.

Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month after a downwardly revised 0.2 percent drop in December. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Posted by on February 14th, 2018 at 8:50 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.