Economic Watchdog, Oct. 11

For the week ending Oct. 6, jobless claims fell by 12,000 to a level of 308,000. This pushed the four-week moving average down to 310,250. This data supports the view that the jobs market remains tight, which does keeps concerns about unit labor costs high. Last Friday, nonfarm payrolls rose by 110,000, but prior months were also lifted to reflect a stronger employment environment.

Crude inventory levels for the week ending Oct. 5 fell by 1.7 million barrels. However, this news was offset by a 1.7 million barrel gain in gasoline stocks. Refineries operated at just 87.8 percent. This news has pushed oil prices higher on the session with crude up nearly a dollar to $81.52.

The import and export report for September showed a 1.0 percent rise in import prices and gain of 0.3 percent in export prices. Though this seems high, the large jump in import prices was mainly due to a rise in petroleum prices. Year on year import prices are up 5.2 percent, but are down 0.2 percent when petroleum is excluded. Though economists like to look at data outside petroleum, it can have an impact on the economy and is likely to put energy-related pressure inside the PPI and CPI.

The international trade data for August showed a narrowing trade gap to a deficit of $57.6 billion. This was better than expectations for a reading of a deficit of $59.8 billion. Economists will be pleased that exports are strong and that consumer spending is not overly strong. The fact is traders want to see moderate spending by the consumer so that the Fed can cut rates further. If spending is too strong, inflation pressures could arise. Overall, today’s data should provide a boost to GDP growth in the third quarter.

Speaking of consumer spending, chain store sales showed weakness during the month of September. Many retailers, including American Eagle Outfitters () and Target (), cut forecasts and posted worse than expected September same store sales. However, Wal-Mart () was a bright spot in the sector after the retailing behemoth reported better than expected same-store sales during the month. Overall, same-store sales were up just 1.4 percent, which was below expectations for a mild gain of 2.0 percent. This also lowers expectations for Friday’s retail sales data, but the news has not hurt stocks.

Tomorrow’s data will get a lot of attention with retail sales expected to rise 0.3 percent during September. Producer prices are set to rise 0.4 percent overall and 0.2 percent excluding food and energy prices. If prices rise too high during the month, it will raise inflation concerns and keep the Fed on hold.

Jody Osborne

Senior Staff Writer & Options Strategist
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