In his podcast addressing the markets today, Louis Navellier offered the following commentary.
Healthy Labor
The Labor Department on Thursday reported that weekly jobless claims declined in the latest week to 194,000 compared to a revised 195,000 in the previous week. Continuing unemployment claims increased to 1.696 million in the latest week compared to a revised 1.680 million in the previous week. Overall, the job market remains healthy.
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The Labor Department reported that the Producer Price Index (PPI) rose 0.7% in January and 6% in the past 12 months. The core PPI, excluding food, energy and trade margins, rose 0.6% in January and 4.5% in the past 12 months. Wholesale food prices decline 1% in January, while energy prices rose 5%.
Although the PPI and core PPI are decelerating on a 12-month basis compared to December, the rate of deceleration have slowed dramatically. As a result, wholesale inflation is proving to be “sticky” since the core price index rose 0.6% in January, up sharply from a 0.2% increase in December.
50 Bips Is The New 25
Cleveland Fed President, Loretta Mester on Thursday said that inflation remains too high and she is open to raising key interest rates higher than her Fed colleagues. As a result, rumblings of a 50-basis point rate hike at the next FOMC meeting have emerged.
Specifically, Mester said “At this juncture, the incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time to be sufficiently restrictive to ensure that inflation is on a sustainable path back to 2%.”
She added that the January CPI data “showed a jump in the monthly rate of overall inflation and no improvement in underlying inflation,” and it provided “a cautionary tale” for those who believed inflation is moving swiftly back to 2%. Interestingly, Mester does not have a vote on the Federal Open Market Committee (FOMC).
The Labor Department on Tuesday announced that the Consumer Price Index (CPI) rose 0.5% in January and 6.4% in the past 12 months. The core CPI, excluding food and energy, rose 0.4% in January and 5.6% in the past 12 months. Food costs rose 0.5% in January and 10.1% in the past 12 months. Energy costs rose 2% in January and 8.7% in the past 12 months.
Sticky Inflation
Owners' Equivalent Rent rose 0.7% in January and 7.9% in the past 12 months. Housing/shelter costs accounted for about half of the January CPI increase. Economists were expecting the January CPI and core CPI to rise 0.4% and 0.3%, respectively, so this was a disappointing report.
Although the 12-month CPI rate has declined for seven straight months, the details were disappointing, so the Fed will continue to raise key interest rates in an attempt to squelch inflation.
The Commerce Department on Wednesday shocked everyone by declaring that retail sales surged 3% in January, which was substantially higher than economists’ consensus estimate of a 1.9% gain. An 8.7% increase in Social Security checks to 70 million recipients likely helped to boost consumer spending as well as positive seasonal adjustments.
Spending at bars and restaurants soared 7.2% and we likely aided by mild winter weather. Auto sales soared 5.9% and furniture store sales rose 4.4%. Sales at electronics and appliance stores rose 3.5%.
Not one retail sales category reported a sales decline in January. Excluding auto sales, retail sales still rose an impressive 2.3%. Clearance sales post holidays helped to reverse the big declines in retail sales for November and December.
In the past 12 months, retail sales rose 6.4%, which is perfectly in line with CPI inflation. There is no doubt that inflation is helping to boost retail sales. In the wake of the stunning January retail sales report, most economists will be revising their first-quarter GDP estimates higher.
Coffee Beans
More than 40 years after The Buggles released "Video Killed the Radio Star", radio is still alive and well according to MRI-Simmons, with 91 percent of U.S. adults listening to the radio at least once a week, far exceeding the reach of live and time-shifted TV at 76 percent, social media at 70 percent an online video at 67 percent. Source: Statista. See the full story here.
