May PPI Comes In At 0.2%, Higher Than Expected 0.1%, Eleventh Consecutive Increase; Retail Sales Slightly Better Than Expected

Tyler Durden's picture

US May PPI came in at 0.2% sequentially, on expectations of 0.1%, and down from 0.8% previously. This was the 11th consecutive increase in PPI. The 12 month change in PPI came at a multi year high 7.3%, much higher than the 6.8% expected, which supposedly is a good thing: inflation is back. PPI ex food and energy was in ling with expectations at 2.1%. Elsewhere, the May Advance Monthly Sales came at -0.2%, on expectations of -0.5%, down from a lower revised 0.3%. Retail sales ex auto and gas came at 0.3% on expectations of 0.2%, with the previous revised lower to 0.2% from 0.3%. Stocks appear to enjoy the increasing inflation on declining economic output.

From the PPI Data:

Looking at the various stages of production we see the following: "The May advance in the finished goods index can be traced primarily to prices for finished energy goods, which rose 1.5 percent. The index for finished goods less foods and energy moved up 0.2 percent. By contrast, prices for finished consumer foods fell 1.4 percent in May...The Producer Price Index for intermediate materials, supplies, and components moved up 0.9 percent in May, the tenth consecutive monthly increase. About two-thirds of the May rise can be traced to a 0.9-percent advance in prices for intermediate goods other than foods and energy. A 1.4-percent jump in the index for intermediate energy goods also contributed to the increase in intermediate goods prices."

Crude goods dropped by 4.1%, primarily on the back of energy: "The index for crude energy materials declined 5.2 percent in May. From February to May, prices for crude energy materials fell 1.2 percent subsequent to a 17.0-percent increase for the 3 months ending in February. The monthly decrease was the result of a 10.9-percent drop in crude petroleum prices. The index for crude foodstuffs and feedstuffs decreased 4.4 percent in May. From February to May, prices for crude foodstuffs and feedstuffs edged down 0.3 percent following a 12.2-percent rise in the previous 3-month period. Over thirty percent of the monthly decline in prices forcrude foodstuffs and feedstuffs can be traced to a 5.8-percent decrease in the index for slaughter steers and heifers. The index for crude nonfood materials less energy moved down 0.9 percent in May. For the 3-month period ending in May, crude core prices decreased 0.7 percent after advancing 10.0 percent from November to February. A major contributor to the monthly decline was the index for copper base scrap, which fell 4.7 percent.

As for retail sales, it was all about auto sales, which tumbled 2.9%. The ball is now and for the next quarter in Japan's court. Unless production picks up and unless GM actually makes a car people want to buy, this number will not be pretty for a while.

And Goldman's full take:

MAIN POINTS:

1. Retail sales declined by 0.2% (mom) in May, a smaller drop than expected. Motor vehicle and parts sales declined, consistent with disappointing unit vehicle sales for the month. This component subtracted 0.5 percentage points from the month-over-month change. Weakness in auto-related components was partially offset by strength elsewhere. Core retail sales-excluding autos, gas and building materials-rose by 0.2% (mom), and the result for April was revised up slightly. Spending increased for health and personal care products stores, clothing stores, and non-store retailers. Overall the report suggests a possible stabilization after a long period of weaker-than-expected US activity data.

2. Headline producer prices increased by two tenths in May, down from 0.8% in April. The increase is mainly driven by lower food prices (-1.4%) while energy prices continue to rise (+1.5%). Core finished producer prices rose in line with expectations, up 0.2% on the month. At the intermediate stage of processing, the core index rose 0.9%, down from 1.1% in April.

3. This morning's data had minor implications for our assessment of real activity. Our Current Activity Indicator (CAI) for May moved up slightly, to 1.2% from 1.1% before the retail sales report. We continue to see downside risk to our 3% forecast for Q2 GDP growth, but these data did not affect our GDP tracking estimates.

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ZeroPower's picture

Futures up on China and US PPI news... PMs aren't following though.

Re-Discovery's picture

Inflation is transitory, didn't you here?  Gas and food will go down . . . at some point . . . in the future . . .

So we ignore that stuff and absolutely focus on the slight beat of expectation on people spending money they don't have.  I mean don't you get it?

 

augie's picture

nothing like a little rampant consumerism to obfuscate any perceived relevance on the public. Looks like we have a ways to go before the storm clouds roll in. 

johngaltfla's picture

Inflation (official) at 0.5%, retail sales (ex Food/Autos) up 0.3%.

Do the transitory math.

SheepDog-One's picture

Well gee I thought the plan was Ben would now take down the markets in spectacular fashion and make everyone beg for QE3...seems instead he's going to repump DOW 12,000. Yea like anyone has a clue what the maniacal monetizers will do next.

Cdad's picture

And even the once venerable Art Cashin has now tossed his credibility, earned over decades of free market trading, on the bonfire of the Ponzi market and QE3 desires.

So let's all pretend that Best Buy's earnings report is worth 7% and forget that entire continents are broke, contracting, and dying at the hands of central banks.

Brilliant!

SheepDog-One's picture

Ignore huge earnings misses in a row but glom onto electronic retailer Best Buy's eek out of an expectations meet....and the crowd goes WILD in the face of world riots, governments firing on their own unarmed protestors, Europe splitting apart at the seams, HOORAY lets pump STAWKS!

Cdad's picture

And never mind about credibility...it's overrated.  Just gap the market on utter nonsense and expect folk to follow...because it has worked so well the last two years causing such a nice economic recovery.

As for that, who cares if the dollar implodes.  Announce QE3 this afternoon, and give the nation exactly what it deserves.

When every last Wall Street banker, trader, and analysts has arrived at the point when they will sell their cred for a one day bounce...be fearful.  The host is dead.

SheepDog-One's picture

Poor old Art, apparently reduced to another Blowhorn free crack addict jonesing for another hit. Throw all your credibility out the window boyz, its time to cling to DOW 12,000 like grim death.

Personally, I dont think Ben has a clear idea what he'll do next he's damned if he does, damned if he doesnt. I think he's scared shitless to let stocks go down, great danger of nothing bringing them back as 401K Brigades dump and leave the casino.

 

Cdad's picture

Dog,

Are you suggesting that Mutual Fund redemption hour [aka 3-4 pm est] is the prevailing threat to the gap up, Ponzified, Roach Motel [SPY] driven, fraud riddled, bonus inducing, economy destroying stawk market?

I would suggest to you that, when even Art Cashin knows it, you are correct.  But what do I know?

See you at the mall, Dog!

SheepDog-One's picture

Must.......go to......mall.....must consume.....retail Gap t-shirts......must buy.....

Cdad's picture

THE ULTIMATE TELL DOG...liquidity crisis forming up on the company most responsible for serving up edible streaming movies to hungry Americans whose federal unemployment insurance has expired.

Big time selling, more broadly, into the magical, fizzy lifting drinking Roach Motel.  Commence with the Great Intraday Betrayal.  And let us all stand back in gaze in horror as Art Cashin joins the chorus of those who think that money printing will cure the plague upon us.

Credibility for sale...credibility for sale...hard fought for...decades of postive comps...at a "historically cheap valuation."

John Law Lives's picture

Trading institutions are generating revenue if the market goes up or down. That is part of the game.  If the interest earned on CDs and savings accounts and money markets and Treasuries and municipal bonds were more attractive than the perceived returns offered by stocks... and therefore no retail investors ever bought and sold stocks, there would be as much of a need for Wall Street.  How can oligarchs steal wealth from ordinary Americans if there is no Wall Street and TBTB banks and HFT algos that don't care about funamentals.  The market does not represent a vehicle for fair and open price discovery of equities.  It is about making as much money as possible for insiders and power brokers. They don't care if it doesn't make sense to us.

 

http://www.youtube.com/watch?v=e9mWAxHpeew&feature=related

Cdad's picture

They don't care if it doesn't make sense to us.

That is my point.  If it makes no sense to "investors," then no capital will form to support it.  If the market continues to be only as viable as the day's counter trend rally, as its credibility is tossed on the fire for just one more gap up, that is the extent to which said market's fate is sealed.  Bring on the crocodile algo!

We.  Are.  Greece.

John Law Lives's picture

We have a Fed Chairsatan who wants to spur inflation whilst punishing savers who would prefer to invest in fixed income.  We sure are lucky to have a Fed Chairsatan like him... (sarcasm)...

yipcarl's picture

Cdad....My sentiments EXACTLY...

Cdad's picture

Cue up MORE STORIES ABOUT SHOPPING!  Let's get BlowHorn [CNBC] anchors out into the malls to do stories on what color Gap t-shirts are hot this quarter.  Let's focus on the utterly irrelevant as Greece walks up to the gallows and prepares to either be sold into slavery or revolt and default on the kleptocracy.

Let's rally banks...on the hopes that accounting is finally made illegal.  Bullish!

Is it bonus time yet?

SheepDog-One's picture

You know whats really glaring thru Cdad, is looking at everything over the last 6 months all we've had is everything sloshing around in a wash tub....nothing much is really higher, or lower, bunch of much ado about nothing. Equities about the same, commodities about the same currencies about the same...but to hear it from the Blowhorn theres great activity going on. Nothing but crap really.

Cdad's picture

...and the market moves from oversold to overbought...in one premarket session.  Nice.

The BlowHorn will now demonstrate to the world that it is the Kingdom of Irrelevance.  Again, more credibility tossed on the funeral pyre of a dying nation.  Or maybe there is a credibility ETF that I don't know about...and it's all good.

 

HelluvaEngineer's picture

I closed out half my VXX position yesterday.  I'll be adding it back on (plus a bit more) today around 2:45PM.  Good luck.

John Law Lives's picture

Trading institutions are generating revenue if the market goes up or down.  That is part of the game.  If the interest earned on CDs and savings accounts and money markets and Treasuries and municipal bonds were more attractive than the perceived returns offered by stocks... and therefore no retail investors ever bought and sold stocks, there would not be as much of a need for Wall Street.  How can oligarchs steal wealth from ordinary Americans if there is no Wall Street and TBTB banks and HFT algos that don't care about funamentals.  The market does not represent a vehicle for fair and open price discovery of equities.  It is about making as much money as possible for insiders and power brokers.  They don't care if it doesn't make sense to us.

http://www.youtube.com/watch?v=e9mWAxHpeew&feature=related

 

buzzsaw99's picture

In honor of the PPI my discretionary purchases will be much less this month.

cossack55's picture

Is long-shelflife food and ammo discretionary?

buzzsaw99's picture

actually ammo is discretionary if one isn't trigger-happy.

snowball777's picture

Why choose? PYOL: pack your own loads.

buzzsaw99's picture

been there, done that. reloading 200 rounds a week gets old after awhile.

snowball777's picture

"When the world is running down..."

http://www.youtube.com/watch?v=pOVljWm7P-8

Gotta do something for entertainment in the bunker.

Boilermaker's picture

Well, you knew they would find a way to jack the futures.  Bravo chap...bravo <golf clap>

buzzsaw99's picture

Berkowitz and Miller bet client's money on financials and lose big. lmao

Death from a-BOVE! lololololol

Ray1968's picture

I guess signs of inflation mean its time to slam the metals.

snowball777's picture

Honey, I shrunk the APMEx cart total.

tarsubil's picture

I try to keep the cart totals the same regardless. What changes is the size of the step towards my total oz goals for Au and Ag.

Hedgetard55's picture

The market is in that mode where they will grab and hug any piece of slightly "good" news and juice prices for a day or two - like a drowning man grabbing his rescuer and pulling him under with him.

SmoothCoolSmoke's picture

Agree.  I cannot believe the "Big Boys" will do anything but sell the open today.... while they tell Mom and Pop to buy! 

Crooks.

Re-Discovery's picture

I think what everybody has missed is 'how' Fed can roll out QE3.  I like W Ross theory that blaming Congress for debt ceiling/deficit/austerity mess is the catalyst.  It seems to round the circle. 

I dont think Bernanke WANTS equities to get crushed.  But he needs an excuse to print so that was a logical one on which to focus.  he will never admit QE is not working.

 

css1971's picture

QE1 & 2 did work. The US and EU banks will live and will be buying up everything they can lay their hands on at 20% of current market prices.

buzzsaw99's picture

QE worked great. It handed the banks risk free profits.

docj's picture

Sorry, I simply cannot believe anything - good or bad - these crapweasal criminals have to say about this economy (or much of anything else, for that matter) anymore.

lizzy36's picture

After 6 down weeks, and almost 8 down days in the last 9, we were due for a pop.

Here it is, enjoy.

Two years after the recession ended we are going to celebrate a "less bad" than expected report. Notwithstanding, that retail sales were lower for the first time in 11 months.

One assumes there is a reason why inflation adjusted retail sales are not reported. Can anyone elaborate on that reason?

Greeny's picture

"Notwithstanding, that retail sales were lower for the first time in 11 months."

It's a May, not Christmas, I surprised that they

come out that "high" with 4$/gallon gas.

FOC 1183's picture

my understanding is that it's a function of timing (i.e., CPI is not typically not available when retail sales are originally released).  You can get Real Retail Sales (e.g., St. Louis Fred) on a delayed basis.

PulauHantu29's picture

It's good to see the breakdown. What I see are some sectors still plunging...oops, I mean correcting (like overvalued house prices) and other sectors increasing (like ALL foods) or package sizes cut by a 3rd (like frozen berries).

RE runs in 10-12 year cycles so I don't expect house prices to stop "correcting" for at least 8 years. Even Wall Street analysts admit house prices will not stop falling until "the employment situation" picks up in the USA which they say won't happen for 8-9 years. So that ties in with the 10-12 year historic cycling of RE also.

GL!

Greeny's picture

"It's good to see the breakdown"

What kind of masochism is that? The most breakdown sector

is PM stocks, check them out, if you will, they've been

cut in half. So, basically you are happy, cause your

and mine

Silver going down the tubes as well, even faster than

general Market. Nice to watch that agony daily, right?

Enjoy counting your loses.

SheepDog-One's picture

Whoever said to buy paper PM's? BTW those PM's 'down the tubes' are still WAY over historic highs...hell I was buying $13 silver 2 years ago and getting laughed at here when I said it would go over $20.

Forward History's picture

Dollar-cost averaging. Another reason to enjoy being a long.

monopoly's picture

Gold, silver still in correction mode. So far, usual summer doldrums.

oogs66's picture

This morning rally looks like it should be faded.  Nothing has improved that much.  The 8:30 numbers had some 'beats' but with revisions it wasn't particularly strong.

The credit markets are experiencing a typical short squeeze morning.  CDX Indices are all tighter and feel strong.  Single names are tighter but a little less strong, and cash is more hopeful of a rally than experiencing an actual rally.

So far in credit it is basically a fast money/hedging squeeze.  Need bonds to be well bid for a sustainable rally.  I don't see that, and expect we will see stocks struggle to hold onto the gains in futures - fast money/hedging equivalent of the CDX indices.