Core Inflation Biggest Drop in 13 Yrs; Retail Sales Declined 0.2%; Inventories Rose 0.4%

The U.S. Census Bureau announced today that U.S. retail and food services sales for October,  were $363.7 billion, a decrease of 0.2% from the previous month, but up 4.5%  from October 2005. This is  second consecutive monthly decline in retail sales, following a 0.8% fall in September.  Total sales for the August through October 2006 period were up 5.3% from the same period a year ago. 

Retail trade sales were down 0.3% from September, but were 4.2% above last year. Motor vehicles and parts dealers were up 10.1% from October 2005 and sales of nonstore retailers were up 8.6% from last year.

Wholesale Inflation (PPI, core PPI):

Inflation at the wholesale level (Producer Price Index) fell 1.6% in October,  matching the record decline set  in October 2001,  reported the Bureau of Labor Statistics of the U.S. Department of Labor. This decrease followed a 1.3% decline in September, led by big declines in the price of gasoline and new cars.

Core inflation (core PPI), which excludes energy and food, dropped by 0.9%, the biggest one-month fall in 13 years, reflecting big declines in prices for new cars and sport utility vehicles.  This drop is a big welcome, following a 0.6% spike in September. Excluding new car prices, core inflation would have risen by a modest 0.1% in October.

  • Energy prices dropped by 5% last month following an 8.4% fall in September. 
  • Gasoline prices were down 7.9% last month while natural gas fell by a record 9.3%.
  • Food costs were down 0.8% in October 
  • Computer prices fell by 3.1%, the biggest drop since June.

Business Inventories:

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers' shipments for September was estimated at $1,050.8 billion, down 2.0%  from August and up 4.9% from September 2005.

Sales at auto dealers rose by 0.6% in October after a 0.7% increase in September. But sales at department stores fell by 0.3% while sales at specialty clothing stores managed only a tiny 0.1% increase. 

Manufacturers' and trade inventories were estimated at an end-of-month level of $1,362.6 billion, up 0.4% from August and up 7.6% from September 2005. 

The total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.30. The September 2005 ratio was 1.26.

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