Roaring Consumer Sentiments

Though the U.S. Retails sales disappointed on Wednesday, the University of Michigan’s Preliminary Consumer Sentiment index did not. For the month of December 2014, it came at 98.2 compared to the expectations of 94.2 and prior month’s reading of 93.6.

Same with UoM’s Inflations Expectation reading. It was 2.4%, though it declined from previous month’s expectations of 2.9%.

On the downside the Capacity Utilization rate – percentage of available resources being utilized by manufacturers – was 79.7% for December versus the forecast of 80.2%. Also on down was Industrial Production month-over-month change, which was -0.1% and below the forecast of 0.1%.

Below are how these graphs look since 2007. Capacity Utilization is unable to break the ceiling of 80% since Q4 2008. Consumer Sentiments is flirting with the high levels last seen in 2007 and the year-over-year Industrial Production is breaking above the yearly rate previously achieved in 2012.UoM_ConsSent_140116_2 Capacity_util_140116_2 IndustrialProd_YY_140116_2 IndustrialProd_140116_2

Killing Softly – The CPI Edition

The U.S. December CPI report came on the softer side. Here are the highlights:

  • Month-over-Month Headline CPI
    • Headline CPI m/m came at -0.4% versus -0.3% expected
    • Gasoline index declined by -9.4% and food index rose by +0.3% so did the index for natural gas and electricity
  • Month-over-Month Core CPI (excluding food and energy)
    • The m/m Core CPI (excluding food and energy) was 0.0% compared to forecast of +0.1%. It is the second time that it did not rise since 2010
    • Shelter index and medical care indexes rose with medical care posting the biggest increase since August 2013; But indexes for apparel, airlines fares, used cars and trucks, household furnishings and operations and new cars declined
  •  Year-over-Year Headline CPI
    • Over the last 12 months headline CPI increased 0.8% before seasonal adjustment versus the expectation of 0.7%
    • Prior month y/y Core CPI was 1.3%
    • Energy index declined by -10.6%; the food index gained by +3.4%, its largest since February 2012;
  • Year-over-Year Core CPI
    • Core increased by 1.6%, its smallest change since February 2014

Here is month-over-month CPI change:CPI_mm_150116_2

Here is month-over-month Core CPI change:CPI_core_mm_150116_2

Here is year-over-year CPI change:CPI_yy_150116_2

Here is month-over-monthCore CPI change:CPI_core_mm_150116_2
It doesn’t look like that CPI is moving towards Fed’ target of 2%. Here is what Narayana Kocherlakota, president of Federal Reserve Bank of Minneapolis, said in his outlook for the US economy and monetary policy in 2015:

  • Says again that he doesn’t favour raising rates in 2015
  • Will take a few years before inflation back to 2%
  • Federal Reserve underperformed on dual mandate for 3 years
  • Lack of Federal Reserve response is further credibility risk
  • Federal Reserve hasn’t acted on inflation expectations drop
  • Federal Reserve eroding credibility by missing inflation goal

Not Over For Franc

Yesterday SNB announced removal of floor for EUR/CHF. Today’s retails sales are not helping the situation. The inflation adjusted retail sales fell -1.2% on year-over-year basis for the month of December 2014. Here is the graph and the downward trend is unmistakable. The ogre of deflation is becoming more menacing.SwissSales_150116_2

Around The Net: Morning News For January 16th, 2015