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MONEYWATCH
Prepared by MCM, Inc.
Previews for the Week of January 8, 2001
Focus: Wholesale Inventories, due January 10 at 15.00GMT/10.00am
m/m % change Nov Oct September August July Inventories -0.2 0.3 0.0 0.6 0.3 Inventory/Sales 1.29 1.30 1.30 1.30 1.30 The NAPM data show a decline in overall inventories through the latter half of the year, accelerating in November and December. A bigger than expected rise in overall business inventories in October was largely the result of a spike in retail inventories. Nevertheless, efforts to cut stocks and reduce inventory ratios will likely be evident in other sectors as well, as the slower pace of demand growth and involuntary building of inventories further up the pipeline are factored into wholesalers decisions. Auto inventories, while not a large component of wholesale stocks, will have contracted due to factory closings in the month.
Focus: Import Prices, due January 11 at 13.30GMT/8.30am
m/m % change Dec Nov Oct Sep Aug Imports -0.3 0.2 -0.5 1.2 0.2 Petroleum -7.0 2.0 -3.2 11.0 0.6 Non-petroleum 0.3 -0.1 0.0 -0.2 0.1 Exports 0.2 0.0 -0.1 0.5 -0.3 Import prices were up 4.7% on the year in November (smallest y/y rise in 13 months, but still well ahead of gains in PPI and CPI), with petroleum prices up 39% over the same period. That sharp divergence in price trends has been partly corrected. A big drop in oil prices in December will pull the headline price index down. There is less certainty about the core non-petroleum price component. The sharp rise in the prices paid component of NAPM points to a rise in the core non-petroleum component. Other price surveys, such as the Philly Fed prices paid and received indices, do not show such robust price gains, though some gain is signaled. The decline in the dollar against the euro and C$ in December may also have served to boost import prices, though note currency effects tend to show up with a lag.
Focus: Producer Price Index, due January 12, at 13.30GMT/8.30am
Dec Nov Oct Sept Aug PPI m/m -0.1 0.1 0.4 0.9 -0.2 Core 0.2 0.0 -0.1 0.3 0.1 PPI y/y 3.5 3.7 3.6 3.3 3.3 Intermediate m/m -0.5 -0.2 0.2 0.7 -0.2 Core 0.3 -0.1 0.0 0.0 -0.1 Crude Goods m/m -4.5 -2.0 3.4 5.3 -1.5 Core 1.0 -2.3 -0.6 0.3 -1.3 The slide in petroleum prices in December should keep PPI tame, as it was in November. That good news on the energy front is offset somewhat by higher natural gas prices. Farm prices were flat in December, suggesting moderation for a while longer on food prices as well. Note, however, that several categories of farm prices are improving (dairy, grain and livestock), so food prices may resume their recent climb. Core prices may be a slightly different matter. For starters, tobacco prices will be higher due to another tax hike. There are conflicting signals among between NAPM prices in December (they were up) and the effect of intermediate PPI prices in prior months (flat). The NAPM data probably mean a rise in core prices further back in the pipeline in December, while tame pipeline prices in prior months should help to keep core finished goods prices from showing too much vigor. Our forecast for a 0.3% gain on the month for core PPI yields a 1.3% rise on the year, the strongest in 3 months after two months of 1.0% gains.
Focus: Retail Sales, due January 15, at 13.30GMT/8.30am
% Change m/m Dec Nov Oct Sep Aug July Retail Sales -0.5 -0.4 0.1 0.9 0.1 0.8 Ex Autos -0.2 0.2 0.4 0.7 0.2 0.8 Holiday demand is among the biggest issues on the real side of the economy at the turn of the year. Sadly, the outlook is not good for December sales. Anecdotal reports got the ball rolling, suggesting consumers were not doing as much buying as hoped. Most retail outlets, in anticipation of weakness, cut prices for categories of goods likely to end up as gifts far ahead of the normal schedule, with the effect of driving down the dollar value of sales. Chain store sales data were about flat for the month; that is the weakest showing for any December since 1986. Home electronics, toys and apparel sold well. Jewelry sales were terrible, exemplary of luxury items in general. Weather compounded the problem, closing shopping malls in the Chicago area on Christmas Eve and through a large part of the Midwest and East during the post-Christmas sales week. Auto sales were down 7%-8% in December, cutting headline sales even more than non-auto sales. To some extent, however, the weather impact may lead to better sales in January. Sales will persist as long as stores want to clear inventory. Some holiday buying lost due to weather cannot be recouped, but the interrupted post-holiday sales may be partly recouped in January. In all, a very tough month.
January 5, 2001 MCM, Inc. 294 Washington Street, Suite 734, Boston, Massachusetts 617-338-9219
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