Initial jobless claims totaled 247k, 2k more than expected and last week was revised up by 2k to 250k. As a print of 238k drops out, the 4 week average rose to 246k from 244k and that is quietly a 3 month high. After rising by 5 straight weeks and by 46k, continuing claims, delayed by a week, fell by 20k.
Bottom line, as seen in this 3 year chart of the 4 week average of claims, the recent uptick is not unusual so I’m not going to make much of it just yet. The pace of firings is still modest when the supply of labor continues to shrink.
Headline PPI and core were both up by .1% m/o/m and 2% y/o/y and 1.9%. The headline numbers were in line while the core was one tenth below the forecast. On the goods side, a .6% m/o/m jump in food prices (lead by meat) offset the .5% drop in energy prices. Service inflation, the sticky side of things, was up by .2% m/o/m and services ex trade was up by .3% m/o/m and 2.2% y/o/y. In the midst of price compression that everyone reading this is clearly aware of, I can’t explain this from the BLS: “A major factor in the June increase in the index for final demand services was prices for securities brokerage, dealing, investment advice, and related services, which rose 4%.” Not surprisingly, “margins for apparel, footwear, and accessories retailing declined by 3.7%.” Lastly, I’ve been talking more about the rise in food prices and this was reflected in the 1.2% m/o/m jump in ‘food and feed’ in the intermediate stage of production category.
Bottom line, at least on the wholesale side, about 2% was the inflation figures in June but the market only cares about CPI tomorrow. Both the headline figure and core are expected to be up 1.7% y/o/y. The continued difference between CPI and PCE remains the weighting divergence between housing and healthcare and how medical costs are calculated as stated this morning.
US Treasuries didn’t move in response but remain lower with yields higher following the selling in European sovereign paper after the ECB headline discussed earlier.