Retail Sales and PPI: A Blowout

Retail sales soared by 5.3% (vs 1.2% est.) in January. Stripping out auto sales, it was even higher at 5.9% (vs 1.0%.) The control number, which strips out food, auto sales, building material stores and gas stations, was up a whopping 6.0%.

Note that gas receipts’ 4% MoM increase was all price change: EIA data shows a 6.3% increase from December which, at current prices, will top 7% for February.

The PPI data was no less spectacular. January headline PPI rose 1.3% (vs. 0.4% est) and core (w/o food and energy) came in at 1.2% (vs 0.2%.)

Futures, which were up modestly overnight, have tumbled to a TL of support at a 19-pt loss, with the SMA10 just below at 3899.42 which would provide better support. Should it not hold, we’re still looking for a backtest of the previous high at 3862.Consider that this spike in PPI has taken place with a relatively modest increase in oil and gas prices. As we’ve discussed for months now, the YoY increase will soar to over 30% in the next two months unless oil and gas prices collapse – something that is hard to fathom in the midst of the weather-related power shortages currently afflicting Texas.

With FOMC minutes coming out later today, it will be very interesting to see how they spin this data.

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