The retail sales report for October was a welcome surprise Tuesday morning, and it came across as another indication that the U.S.economy is remaining above the recession level.
Led by increases in most sectors, retail sales increased 0.5% in October. Excluding autos, retail sales jumped 0.6%.
With the holiday shopping season just now getting started here are some of the categories reported: Electronics and appliance stores (+3.7%) saw the biggest jump in sales followed by building materials and garden and equipment supplies dealers (+1.5%). Department stores (-1.2%) saw the biggest decline versus September and were followed by clothing and accessories (-0.7%), furniture and home furnishings (-0.7%), and gasoline stations (-0.4%). Core retail sales, which exclude auto, gasoline station, and building materials sales, were up 0.6% and will be a positive input for the PCE component of Q4 GDP.
Inflation data also proved encouraging, with total PPI declining 0.3% and core PPI, which excludes food and energy, checking in flat, another sign inflation is under control.
Stocks are having to battle to get through this area of resistance. Looking at SPY, the trade able ETF for the S&P 500, to advance significantly it must get over this 126 area and then above 127 where things start to clear up.
Meanwhile the yield on the Italian 10 year note is flirting with a seven handle again (now 6.92%).
George Friedman of Stratfor Global Intelligence makes some interesting political remarks as he writes: “And here we come to the real European crisis. Given the nature of the crisis, which we have seen play out in Greece, the European elite can save the European concept and their own interests only by transferring the cost to the broader public, and not simply among debtors. Creditors like Germany, too, must absorb the cost and distribute it to the public. German banks simply cannot manage to absorb the losses.
Europewas not supposed to work this way. The European Union idea had promised eternal prosperity. That and preventing war were the European Unions great promises. …Failure to deliver on either promise undermines the European project’s legitimacy. If the price of retaining Europeis a massive decline in Europeans’ standard of living, then the argument for retaining the European Union is weakened.
If Europe is perceived as failing because the European elite failed, and the European elite is perceived as defending the European idea as a means of preserving its own interests and position, then the public’s commitment to the European idea – never as robust as the elite’s commitment – is put in doubt. The belief in Europethat the crisis can be managed within current EU structures has been widespread. The Germans, however, have floated a proposal that would give creditors in Europe– i.e., the Germans – the power to oversee debtors’ economic decisions. This would undermine sovereignty.
Trade with a plan.