September 17, 2009
– BREAKFAST WITH DAVE
U.S. CPI DATA SUPERB
Many sectors are havingtrouble seeing much in theway of any pricing power
While the bond market sold off yesterday, one has to be encouraged by the CPIdata. The core was only +0.1% MoM for the second month in a row (actually,August was +0.07%). Even adjusting for Cash-for-Clunkers, the core would be0.16%, so still very tame. Many sectors are having trouble seeing much in the wayof any pricing power in the retail sector. The YoY headline inflation rate, even with the recent boost from energy prices, is running at -1.5% YoY. And, the core index,which excludes food and energy, is now down to +1.4% and within distance of taking out the 2003 low of 1.1%.Again, in terms of sectors with any pricing power, it was lean pickings, and those that looked to have any pricing power seem to have been seasonal in nature.
Air fares rose 1.6% in August on top of a 2.1% boost the month before.
Hotels rose 0.5% and, believe it or not, are up in four of the past five months.
Apparel was little changed but that followed two very positive months andsince May prices have strengthened at a 5.0% annual rate.
Movie theatre prices jumped 1.4% and have now risen four months in a row.
Delivery services (Fedex, UPS) jumped 3.3% and this came on the heels of a0.5% increase the month before.
Hospital services posted a respectable 0.5% gain as well last month.But there were steep declines in many other areas too: Jewelry, video-audioequipment, home improvement, appliances, furniture, sporting goods, apartmentrents, and autos. In other words, wide swaths of the discretionary or cyclical areasof consumer spending continue to lose pricing power.
LOONIE LIKES THE CANADIAN DATA
The Canadian dollar should really like the headline and details of thatmanufacturing report that was released yesterday. Not only were July shipmentsup a resounding 5.5%, but this was on top of a 2.2% runup in June and it transcended the auto sector revival as 15 of 21 industry groups posted gains.Excluding autos, sales were up 2.1% as well.
MR. MARKET IS ON STEROIDS
Not much more to say. The S&P 500 is now up more than 60% from the lows,which is truly amazing and kudos to those who called it. But the question iswhether the fundamentals will ever catch up to this level of valuation — usuallyafter a 60% rally, we are fully entrenched in the next business cycle. Never beforehave we seen the stock market rise so much off a low over such a short timeperiod, and usually at this state, the economy has already created over one millionnew jobs — during this extremely flashy move, the U.S. has shed 2.5 million jobs(as may as were lost in the entire 2001 recession).
Page 3 of 8