Trifecta Of Bad Data: Initial Claims Bad (New York Layoffs Surge), PPI Ugly, Retail Sales Miss

While last month's upward revised 478K number was not repeated, just released initial claims still continued at the NFP busting 434K, worse than consensus of 430K. At this level of initial ciams, the economy is losing about 50K jobs per month. According to the release, the primary factor was New York State, which saw a surge in Initial Claims of +24,431, due to "Layoffs in the transportation and service industries." Continuing claims were just as bad, at 3,756K on expectations of 3,700K, with the previous number revised, how else but, higher to 3,751K. And just as notably, the 99 week cliff impairs eve more people, as a total of 17K people dropped off EUC and Extended Benefits. Elsewhere, PPI came higher than expected, with April PPI data at 0.8% on expectations of 0.6%, up from 0.7% before, confirming that delayed downstream inflation effects will plague the economy for a long time.

Some observations from the Crude, Intermediate and Finished goods:

Crude energy: The index for crude energy materials moved up 4.8 percent in April. From January to April, crude energy prices advanced 5.3 percent compared with a 17.9-percent jump in the previous 3-month period. For the month of April, the index for natural gas rose 9.4 percent, accounting for over half of the increase in prices for crude energy materials. Advances in the indexes for crude petroleum and coal also contributed to higher crude energy prices. (See table 2.)

Crude foods: Prices for crude foodstuffs and feedstuffs advanced 4.0 percent in April. For the 3 months ending in April, the index for crude foods jumped 11.4 percent subsequent to moving up 5.5 percent from October to January. Accounting for about half of the monthly rise in April, the grains index increased 15.5 percent. Higher prices for slaughter steers and heifers also were a factor in the advance in the crude foods index.

Crude core: The index for crude nonfood materials less energy rose 2.6 percent in April. From January to April, crude core prices moved up 2.5 percent after a 10.1-percent advance in the previous 3-month period. For the month of April, a 4.5-percent increase in the index for copper base scrap was a factor in higher crude core prices.

Intermediate core: Prices for intermediate goods less foods and energy moved up 1.1 percent in April, the ninth consecutive monthly rise. About fifteen percent of the April gain can be attributed to the index for primary basic organic chemicals, which increased 3.2 percent. Higher prices for ethanol and steel mill products also contributed to the advance in intermediate core prices. (See table 2.)

Intermediate energy: The index for intermediate energy goods climbed 1.9 percent in April, the smallest advance since a 1.5-percent increase in November 2010. Prices for diesel fuel, which moved up 3.5 percent, were a significant contributor to the April rise. Higher prices for gasoline also were a factor in the increase in the intermediate energy goods index.

Intermediate foods: The intermediate foods and feeds index advanced 1.8 percent in April, the ninth straight monthly increase. A 5.6-percent jump in prices for beef and veal accounted for a quarter of the April advance in the intermediate foods and feeds index.

Finished energy: Prices for finished energy goods increased 2.5 percent in April, the seventh consecutive monthly advance. Over half of the April rise can be attributed to the gasoline index, which climbed 3.6 percent. Higher prices for liquefied petroleum gas and residential natural gas also were factors in the increase in the finished energy goods index. (See table 2.)

Finished core: The index for finished goods less foods and energy moved up 0.3 percent in April, the fifth straight monthly rise. Nearly one-fourth of the April monthly advance can be traced to a 1.2-percent jump in civilian aircraft prices. An increase in the index for light motor trucks also contributed significantly to the rise in finished core prices.

Finished foods: Prices for finished consumer foods rose 0.3 percent in April after falling 0.2 percent in the prior month. Leading this advance, the index for eggs for fresh use surged 56.7 percent.

Concluding the trifecta of bad data was advance retail sales, which came at 0.5%, below expectations of 0.6%, with the previous revised much higher from 0.4% to 0.9%. And retail sales ex the volatiles autos and gas was up a token 0.2%, compared to expectations of 0.5%, down from a revised 0.7%.

Luckily, today's transitory theme of Deflation ON will more than allow the Fed to beat the dollar and spike commodities from a new and improved level, which will make the transition to QE3, or however it is called, that more palatable.