The PPI ratcheted up 0.7% this month, for reference, it jumped 1.9% last month. There is significant inflation pressures on the producer side. The consensus estimate for the PPI was 0% this month. Core PPI was down a bit at-0.3%, I have no faith in the core numbers, simply because they exclude most everything that has been increasing in price. The report shows that there are still significant inflation pressures at the producer level. While much of this cost has not yet been fed down to the consumer level, with increases this significant, there is no doubt that they will. However, realize that the relationship between the PPI and CPI isn’t typically a simple one.
Retail sales came in at about expected levels. Retail sales (ex-Autos) is actually a bit stronger than I expected. Consumer spending is still strong. This leads me to believe that the savings rate will again be negative early next month.
In case you are wondering why we should care? The housing market does not exist in a vacuum, it is driven by consumer sentiment and a host of economic factors. In order to understand the housing market movement, we must also monitor and understand the movement of it’s related factors.