Quick Thoughts on US Data

Business inventory data reinforces the note yesterday warning of sharp upward revision to Q4 US GDP.  We already knew that factory inventories (+0.1%) and wholesale inventories (1.0%).  The new info today is retail inventories (+2%). 

Sales rose 0.7% on the month and that laves the inventory/sales ratio as the lowest since in nearly a year (march 2011).  This means that the build up of inventories in Q4 will not need to be shed in Q1.  This should encourage some optimism that the US may maintain some of the upside momentum seen at the end of last year.

US retail sales data seemed somewhat disappointing, but the details were better than the optics.  The headline rose 0.4% a bit lower than expected but better than the revised 0.1% rise in December.  Excluding autos, sales rose 0.7%, which was a touch better than expected. 

The core retail sales, which excludes autos, gasoline, and building materials, and is used for GDP calculations rose 0.7%, more than offsetting the 0.4% decline in December.    January makes up for December weakness, but the underlying trend does not impress. 

Still economic data out in the next few days is likely to confirm the firmer tone of overall economy.  Industrial production figures on Wednesday are expected to show a healthy 0.7% increase and capacity utilization is likely to reach its highest point since July 2008. 

Empire and Philly Fed surveys (Wed and Friday) are expected to show the economy gained additional momentum in February.  The inflation gauges should see producer price ease on a year-over-year comparison to its lowest level since last January. 

Consumer prices may see the headline rate ease (2.8% vs 3.0%), but the core rate is likely to be sticky at 2.2%.  This performance on CPI whereby headline softens but core stays firm may be a feature the period ahead.