PPI lower than expected, but better Canada data again.

CPI Headline: -0.6% vs -0.2%
Ex Food and Energy +0.1% which was as expected.
YoY 4.4% vs 4.9% expected
YoY Ex Food and Energy a small 1.0% which is as expected.

The Fed is not concerned about inflation. Capacity is still low and this is not the environment for increasing prices on any level.

Meanwhile the Canadian Wholesale Sales rose by a greater than expected 3% vs 0.5% increase (fastest pace in 3 years) .  The level of inventories also declined by 1.1% which brings the inventory to sales ration down to 1.19 frm 1.24.  This also suggests further growth down the road as inventories are replenished.

The USDCAD has support below at 1.0100 area.  A break looks toward 1.0077 and below that the lure of the 1.0000 should take hold.

US Retail Sales, PPI and Empire Manufacturing Index due out at 8:30 AM

The US will release the Retail Sales for August along with the PPI for the same month.  The Retail Sales data will be boosted by Auto sales as a result of the Cash for Clunkers program. The estimate is for a gain of 1.9% for the month with the Ex Auto component estimated to come out at +0.4% (vs -0.6% last month). 

The PPI is expected to rebound with a 0.8% gain after falling by -0.9% last month. They Ex Food and Energy is expected to rise by 0.1% for the month versus a fall of 0.1% in July.  For the Year on Year figures, the inflation rate is expected to fall by -5.3% vs -6.8% last month.  Part of the gain is as a result of the expected large increase this month. The other part is as a result of the falling out of a -0.5% change that occurred last August. Over the coming months, -7.2% of cumulative monthly declines in PPI will drop out of the YoY data (see declines in Sept, Oct, Nov and Dec 2008 in the chart above).  As a result, the PPI will show a quick move higher toward +2.0% YoY.

The Empire Manufacturing Index is expected to rise to 15.0 from 12.08 last month.  The positive reading last month was the first increase since April 2008. 

Component Values from last month showed New Orders rose to the highest level since November 2007.

Prices Paid                            13.83
Prices Received                  -12.77
New Orders                            13.43
Shipments                               14.11
Delivery Time                      -10.64
Inventories                           -22.34
Unfilled Orders                    -9.57
Number of Employees      -7.45

PPI and US Housing Starts and Building Permits lower than expected

Housing Starts fall to 581K from 587K
Building Permits came in at 560K versus 570K

US PPI MoM came in much lower at -0.9% vs -0.3% expected and 1.8% gain last month
Ex Food and Energy  -0.1% vs +0.1% expected and +0.5% last month

YoY came in lower at -6.8% vs -5.9% expected and down from -4.6% last month
Ex Food and Energy +2.6% vs 2.8% expected.

Stocks fell on the news and the intial reaction in the currency markets has been a reversal of the trends seen today with EURUSD, GBPUSD and USDJPY moving lower.  However, there has been a bounce back off the lows.  Watching 1.6413 in the GBPUSD and the 1.4082 level (close from yesterday on the EURUSD).

Swiss PPI Released

The CHF PPI came out below expectations at -0.3% from the previous -0.2%. A rise to 0.1% was forecast.

EUROZONE Data Released

The EU PPI came out at worse than expected -1.0% from the previous -0.7%.  A drop to -0.9% was forecast.

The EU Revised GDP came out as forecast, unchanged from the previous -2.5%.

UK PPI

UK PPI OUTPUT (MOM) +0.6 EXPECTED +0.2

        PPI OUTPUT(YOY) +1.2 EXPECTED +0.7

GBP JUMP UP 20 PIPS TO 1.5055 HIGH FOR THE DAY IS 1.5066 BID

EUROZONE PPI Released

The EU PPI came out lower than expected at -0.7% from the previous -0.5%.  No change from -0.5% was forecast. 

This poor data was clearly ignored as risk appetite is trumping across the board.

German PPI Released

Germany’s PPI came out worse than expected at -0.7% from the previous -0.5%.  A slight rise to -0.3% was forecast.

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