It's The Economy Stupid: PPI & Retail Sales

Economic Event	Period	Economic Survey	Actual Reported	Original Prior	Revised Prior
Producer Price Index MoM	OCT	0.2%	-0.2%	1.1%
PPI Ex Food & Energy MoM	OCT	0.1%	-0.2%	0.0%
Producer Price Index YoY	OCT	2.6%	2.3%	2.1%
PPI Ex Food & Energy YoY	OCT	2.4%	2.1%	2.3%
Advance Retail Sales	OCT	-0.2%	-0.3%	1.1%	1.3%
Retail Sales Less Autos	OCT	0.2%	0.0%	1.1%	1.2%
Retail Sales Ex Auto & Gas	OCT	0.4%	-0.3%	0.9%	1.0%
Retail Sales Control Group	OCT	0.4%	-0.1%	0.9%

 

 

Economics For Dummies

 

PPI drop = Good for the economy

Retail Sales drop = Bad for the economy

 

Producer Price Index

 

Wholesale prices in the U.S. unexpectedly fell in October for the first time in five months as energy and vehicle costs dropped.   The 0.2 percent decline in the producer price index came after a 1.1 percent increase the prior month.  The median estimate in a Bloomberg survey of 73 economists called for a 0.2 percent rise.  Excluding volatile food and energy, the so-called core measure decreased 0.2 percent, the first drop since November 2010.

 

Retail Sales

 

Retail sales in the U.S. fell in October for the first time in four months, influenced by the effects of SuperStorm Sandy, which hurt receipts for some and

helped for others.

 

The 0.3 percent drop followed a 1.3 percent increase in September that was larger than previously reported, Commerce Department figures showed today in Washington. The median forecast of 83 economists surveyed by Bloomberg called for a drop of 0.2 percent. The Commerce Department said it was able to

collect information from the storm-affected area, even as it was not able to quantify its impact.

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

 

It's The Economy Stupid: Balance & Jobs

Trade balance was better, still negative, but not as negative.

 

Initial Jobless Claims were better, Continuing Claims were better, but supposedly the numbers are kind of iffy due to state offices being affected by SuperStorm Sandy.

 

Economic Event	Period	Economic Survey	Actual Reported	Original Prior	Revised Prior
Trade Balance	SEP	-$45.0B	-$41.5B	-$44.2B	-$43.8B
Initial Jobless Claims	NOV 3	365K	355K	363K
Continuing Claims	OCT 27	3257K	3127K	3263K	3262K

 

TRADE DEFICIT

 

The U.S. trade deficit unexpectedly narrowed in September to the lowest level in almost two years as exports climbed to a record.

 

The gap shrank 5.1 percent to $41.5 billion, the smallest since December 2010, from $43.8 billion in August, Commerce Department figures showed today in Washington. The increase in sales to overseas buyers was broad-based, with everything from soybeans to fuel and civilian aircraft showing gains.

 

Growing demand from emerging markets in South and Central America may be helping to overcome a slowdown in Europe and China that is hurting companies such as Emerson Electric Co. At the same time, imports also climbed as U.S consumers are beginning to spend more as the job market stabilizes.

 

JOBLESS CLAIMS

 

Fewer Americans than forecast filed claims for unemployment insurance last week as the effects of Hurricane Sandy started to show up.

 

Applications for jobless benefits fell by 8,000 to 355,000 in the week ended Nov. 3, the Labor Department said today in Washington. One state said the loss of electricity due to the storm suppressed filings, while others said workers who lost their jobs as a result of the weather were starting to apply, a Labor Department spokesman said as the data were released to the press.

 

It may take three to four weeks to see the full impact, the spokesman said, which indicates claims may jump back in coming weeks as more storm-related applications begin to be processed.

 

YESTERDAY’S MARKET:  A whole lot of red numbers

 

Not exactly a rousing endorsement of the election and the likelihood of satisfactorily addressing the fiscal cliff.

 

Description	Ticker	Last	CHANGE	% Chg Today	Pct Chg 1Yr
STOCK MARKETS
Dow Jones Industrial Average	INDU Index	12932.730	-312.9500	-2.3627	6.2657
S&P 500 Index	SPX Index	1394.530	-33.8600	-2.3705	9.2957
NASDAQ Composite Index	CCMP Index	2937.288	-74.6450	-2.4783	7.6920
Russell 3000 Index	RAY Index	824.050	-19.7400	-2.3394	9.1269
Russell 2000 Index (Small)	RTY Index	804.520	-21.2900	-2.5781	6.5208
S&P 400 Mid Cap Index	MID Index	981.310	-21.6000	-2.1537	8.2120
S&P 600 Small Cap Index	SML Index	466.570	-2.3100	-0.4900	9.0265
TREASURIES	% Yield
3 Month Treasury	0.0966		-0.0050	-5.2632
6 Month Treasury	0.1420		0.0000	0.0000
2 Year Treasury	0.2659	99.969	0.0078	0.0078
5 Year Treasury	0.6636	100.414	0.0547	0.0545
10 Year Treasury	1.6710	99.547	0.0977	0.0982
30 Year Treasury	2.8310	98.328	-0.1094	-0.1111
ENERGY
Crude Oil, Brent Index	Brent Crude	107.580	0.7600	0.7115	-0.5907
Crude Oil, Louisiana Lt. Sweet	LA Lt Sweet	105.440	-4.5700	-4.1542	-8.7300
Natural Gas, Henry Hub Index	Nat Gas	3.535	-0.0430	-1.2018	-20.0361
PRECIOUS METALS
Spot Gold $/oz	GOLD	1718.000	0.2500	0.0146	-3.8583
Spot Silver $/oz	SILVER	31.855	0.0300	0.0943	-8.9129
CURRENCIES
Euro	EUR Curncy	1.274	-0.0034	-0.2662	-7.9448
Japanese Yen	JPY Curncy	79.890	-0.1000	-0.1250	-2.6794
British Pound	GBP Curncy	1.599	0.0007	0.0438	-0.6401
Swiss Franc	CHF Curncy	0.947	0.0019	0.2011	-5.4810
Canadian Dollar	CAD Curncy	0.997	-0.0001	-0.0100	1.2242
Chinese Yuan	CNY Curncy	6.258	0.0110	0.1761	1.4560
FOREIGN INDICIES
FTSE 100 INDEX	UK	5807.030	15.4000	0.2659	4.3859
CAC 40 INDEX	FRANCE	3433.590	24.0000	0.7039	9.2330
DAX INDEX	GERMANY	7264.320	31.4900	0.4354	21.8999
NIKKEI 225 INDEX	JAPAN	8837.150	-135.7400	-1.5128	2.0986
HANG SENG INDEX	HONG KONG	21566.910	-532.9400	-2.4115	9.5965

 

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

445 North Blvd, 7^th Floor

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One City Plaza, 7th Floor

Corner of North Blvd & 4th Street

Exit 1B I-110 Convention Street,

Turn Left to get to North Blvd,

Turn Right on North Blvd

 

It's The Economy Stupid: A Bond Guy Looks At The Numbers

I am a bond guy.  Basically have spent my entire career dealing with fixed income securities.  So when I look at economic stuff I always look at them in light of how they will likely affect bonds. 

 

US Treasury 10 Year Note 1.625% Coupon 08/15/2022 Maturity:  Bid 98-25+ / Ask 98-26 / Bid Yield 1.758%

 

The 171k increase in non-farm payroll employment came in better than expected and the 84k upward revision to the prior period’s number indicates that the number is not a fluke, but confirmation of a SLIGHTLY better trend in numbers.  Keep in mind that the three month moving average for job creation was basically unched (unchanged). Don’t get all happy and joyous just yet, cause these numbers just mean the economy can sustain about a 2% GDP growth rate.  Not exactly a gang buster number.  

 

The numbers seem to suggest that the recent trading range for the 10-year Treasury note (currently yielding 1.75%) will probably hold and we are more likely to see a 1.50% yield on the 10-year Treasury before we see a 2.0% yield on the 10-year Treasury.   But that’s just for the current trading range.  Long term I think bond yields are going up, bond prices are going down.  When I think that the “long term” is going to start keeps getting pushed back by the Fed. 

 

NOW, about the two questions I get asked most often this week.

 

First.  I think a rational man (as opposed to a fan) has to see and think that Alabama should be favored in Saturday’s game.  If for no other reason than because Alabama has had better quarterback play and better offensive line play.  Both teams have really good defenses, the defenses are about equal.  Same with special teams.  Clearly if you’ve watched these team play you would have to say that Alabama’s offense has been more consistent than LSU’s offense.  And the one thing we know about Nick Saban is that he is the master at taking away what his opponent does best.  So he is going to scheme to stop LSU’s running game.  His corners are going to man up, and there will be 8 men in the box, or 7 with a safety shallow in run support.  In order for LSU to win Zach Mettenberger and the wide receivers will have to play better.  Much better.  LSU will have to be more efficient, more disciplined, less turnovers, less penalties.  I am a big believer in probability theory and the idea of reversion to the mean.  That leads me to believe that the greater probability is that Alabama plays to its mean and the somewhat lesser probability is that LSU plays above its mean, but it is certainly possible.  It happens all the time in the SEC.  It’s why you play the game.  Look, these are 20 year old kids playing a game.  Hell, one of them wakes up with a zit on his forehead and his psyche could be destroyed for the day.  So we play the game hoping Alabama has more zits.  Geaux Tigers!

 

Second, there is an election Tuesday.  I can’t help but think that the economic numbers and the Sandy weather (apparently you can’t call it a hurricane) helps the incumbent right before the election.      

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury