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Oct. 15 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said additional monetary stimulus may be warranted because inflation is too low and unemployment is too high.
“There would appear -- all else being equal -- to be a case for further action,” Bernanke said today in the text of remarks given at a Boston Fed conference. He said the central bank could expand asset purchases or change the language in its statement, while saying “nonconventional policies have costs and limitations that must be taken into account in judging whether and how aggressively they should be used.”
He didn’t offer new details on how the Fed would undertake those strategies or give assurances the central bank will act at its Nov. 2-3 meeting.
Headline inflation at the consumer level eased and the core rate remains extremely soft. Although this morning's positive retail sales report should have the Fed happy, the CPI numbers will have the Fed still worried about inflation being too low. The overall CPI in September slowed to a 0.1 percent gain from 0.3 percent in August. Analysts had projected a 0.2 percent increase for September. Excluding food and energy, CPI inflation was unchanged for the second month in a row and came in below the median market forecast was for a 0.1 percent uptick.
The strongest component was for energy, up 0.7 percent in September, following a 2.3 percent jump the prior month. Food also was on the warm side, gaining 0.3 percent after a 0.2 percent rise in August.
By major expenditure components, upward pressure in September was seen in medical care, up 0.6 percent, and in transportation (up 0.5 percent and including a 1.6 percent hike in gasoline). Weakness was in a number of categories: housing, down 0.1 percent; apparel, down 0.6 percent; recreation, down 0.3 percent; education & communication, down 0.1 percent; and "other," down 0.1 percent.
The bottom line is that core inflation is anemic. The Fed will likely want to take out some sort of insurance policy at the next FOMC meeting to ensure that no inflation does not turn into deflation.
The consumer is opening his wallet wider as the pace of retail sales has picked up. Although auto sales led a September gain, strength is broad based. Overall retail sales in September advanced 0.6 percent, following a 0.7 percent gain in August (revised up from 0.4 percent) and a 0.5 percent increase in July (previously 0.3 percent). The September figure came in above the market expectation for a 0.5 percent increase. Excluding autos, sales rose 0.4 percent, following a 1.0 percent boost in August (previously 0.4 percent) and matching analysts' median forecast. Sales excluding autos and gasoline rose 0.4 percent, following a 0.9 percent surge in August.
Today's report shows the consumer sector apparently in better shape than almost anyone believed-especially after taking into account upward revisions for July and August. The impact on the markets could be tricky today. Although the economy is in better shape than believed prior to this morning's release, there could be negative impact if the report is seen as significantly reducing the odds of further quantitative easing by the Fed.
Manufacturing activity is picking up steam in the New York region. The Empire State index jumped to 15.73 in October vs. 4.14 in September. The larger the reading over zero, the greater the rate of month-to-month growth.
And growth is strong in the two key areas of new orders and employment. New orders rose to 12.90 vs. 4.33 while employment rose to a very strong 21.67 vs. 14.93 and 14.29 in the two prior months which were already strong. Shipments jumped to 19.39 vs. September's minus 0.27. A negative is backlog which, at minus 1.67, continues to contract though at a slowing rate.
Strength is confirmed by the six-month outlook where the index jumped nearly nine points to 40.0. This report, which points to a new rise in the manufacturing recovery, has been much stronger than the sister report from the Philadelphia Fed. Yet the indications from this report suggest that wide negatives in the Philadelphia report will at least move to neutral. The Philadelphia manufacturing report will be posted next Thursday.
The U.S. trade gap widened sharply in August, largely on nonoil imports but with oil imports also contributing. Exports continued to grow but only modestly. The overall U.S. trade deficit increased to $46.3 billion from $42.3 billion in July. The latest trade gap came in wider than the median market forecast for a $44.3 billion deficit. Exports edged up 0.2 percent, following a 2.0 percent gain in July. Imports rebounded 2.1 percent, following a 2.1 percent decline in July. Nonoil goods imports in August rebounded 2.2 percent, following a 3.0 percent decrease the month before.
The worsening in the trade gap was primarily in the nonpetroleum deficit which grew to $35.9 billion in August from $33.2 billion the previous month. The petroleum goods gap expanded to $21.9 billion from $20.8 billion in July.
Producer price inflation was mixed for September as food prices kept upward pressure on the headline number with energy also contributing. The overall PPI growth rate remained elevated at 0.4 percent in September, matching the August rise and well topping the median forecast for a 0.1 percent increase. At the core level, the PPI remained sluggish with a 0.1 percent gain-the same as in August and equaling expectations.
For the latest month, food jumped 1.2 percent after dipping 0.3 percent in August. The energy component rose 0.5 percent, following a 2.2 percent jump in August.
After improving five of the last six weeks, initial jobless claims rose 13,000 in the October 9 week to a higher-than-expected 462,000 (prior week revised 4,000 higher to 449,000). The Labor Department had to use estimates for five states due to administrative delays tied to this week's Columbus Day. The four-week average, up 2,250 to 459,000, ended six straight weeks of improvement.
Continuing claims fell substantially in the October 2 week, down 112,000 to a recovery low 4.399 million. Yet improvement here reflects, to an uncertain but probably significant degree, the loss of benefits. Those on emergency and extended benefits both fell. The unemployment rate for insured workers is down one tenth to 3.5 percent.
Columbus Day clouds the initial claims results which will likely be expected to fall back in next week's report. The outlook for the jobs market remains uncertain.
NEW YORK (CNNMoney.com) -- Bank repossessions and foreclosure auctions hit record levels in the third quarter, RealtyTrac said on Thursday.
372,445 foreclosure auctions were scheduled in July, August and September, while 288,345 properties were repossessed by lenders over the same time period.
Overall foreclosure filings edged up to 930,437 in the third quarter, a 4% increase from the previous quarter. One in every 139 homeowners received a foreclosure filing during those three months.
Bank repossessions, or REOs, also are on the rise. In September, a record 102,134 homes were taken back by banks. It's the first time repos have topped 100,000 in a single month.
NEW YORK (CNNMoney.com) -- JPMorgan Chase said it earned $4.4 billion during the third quarter on Wednesday, an increase of 23% from a year ago, as loan loss reserves continued to decline.
The first of the nation's big banks to report results, JPMorgan (JPM, Fortune 500) said it earned $1.01 per share. Analysts polled by Thomson Reuters were expecting the New York City-based bank to earn 90 cents a share during the three-month period ended September 30.
The provision for credit losses, the funds set aside for the allowance of bad loans, was reduced to was $3.2 billion, down 67% from a year ago.
"We are pleased to report a continued overall decline in credit costs, although our mortgage and credit card portfolios continued to bear very high net charge-offs," said chief executive Jamie Dimon in a statement.
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Import prices fell 0.3 percent in September skewed by a 3.1 percent temporary downswing in petroleum prices. Excluding fuels, import prices rose 0.3 percent for a second straight month. Prices for petroleum-based products, including natural gas, all show wide declines though a reversal is in store given this month's $10 jump to $80 oil. Prices of imported finished goods show very little change, up 0.1 percent for consumer goods for a second straight month, small increases that don't offset 0.2 percent declines in the prior two months. Prices for imported capital goods are unchanged. Year-on-year, total import prices are up 3.5 percent with ex-fuel up 2.6 percent.
Export prices rose 0.6 percent for a second straight sizable gain that once again reflects pricing power for agricultural products which rose 2.4 percent on top of August's 4.1 percent gain. The plus 12.1 percent year-on-year rate for agricultural export prices is the highest in two years. Finished goods prices on the export side are mixed with capital goods unchanged but consumer goods excluding autos showing a 1.0 percent jump.
Import prices were tame in September but rising oil prices together with this month's weakness in the dollar point to upward pressure for October. For tomorrow's producer price and Friday's consumer price reports for September, today's report points to mild readings.