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On Tuesday, the producer price index continued to show little near term worry about inflation. The PPI showed a gain of 0.3 percent overall and a decline of 0.6 percent at the core. Both figures were below expectations for gains of 0.5 percent and 0.1 percent respectively. Compared with the year ago period, the headline PPI is down 1.9 percent with the core rate up 0.7 percent.

The consumer price index for October was released Wednesday morning with the headline figure up 0.3 percent and the core up 0.2 percent. Both of these figures were a tenth above estimates, Year on year, the headline figure is down 0.2 percent and the core rate is up 1.7 percent. The Fed would like to see a reading between 1.0 and 2.0 percent. Traders are not concerned about inflation in the near term, but wonder how the Fed will combat rising pricing pressures when the economy begins to mend more completely.

The manufacturing sector has been a strength for the economy as it attempts to recover. However, recent data has shown less strength, albeit still positive. Industrial production in October rose 0.1 percent for its fourth straight monthly gain. However, this was well below expectations for growth of 0.4 percent. In the past year, industrial production is down 7.1 percent, below the 6.0 percent decline seen in September. Overall, manufacturing continues to show expansion, but regional reports have shown slower improvement. The Philly Fed Survey will be released Thursday and is expected to show a gain of 5-tenths in November to a reading of 12.0.

The big disappointment Wednesday came from the housing starts report for October. Housing starts came in at an annualized rate of 0.529 million units, which was a decline of 10.6 percent from October's figure. Estimates were for a reading of 0.600 million units on an annualized basis. Building permits also declined, falling 4.0 percent. In the past year, housing starts are down 30.7 percent with permits off 24.3 percent. Some economists feel that this weakness had to do with the expected end to the first time home buyers credit. However, bill has since been extended and this could provide strength in the months to come.

In related news, mortgage applications continued to weaken as well this past week. For the week ending Nov. 13, purchase applications fell 4.7 percent following a decline of 11.7 percent in the prior week. This happens to be the worst reading for mortgage apps since 1997. Even refinancing applications fell, down 1.4 percent even though the 30-year fixed mortgage rate was down 7 basis points to 4.83 percent.

The retail sector starts to get more attention this time of the year thanks to the holiday season. There are concerns that retail sales will be light this year given the weakness in the jobs market. Same-store sales data for the week ending Nov. 14 showed a 2.4 percent year on year gain as measured by the ICSC-Goldman Store Sales report. The Redbook data showed a gain of 2.0 percent. IN related news, Target (
The flow of economic data will continue Thursday with reports on jobless claims, leading indicators and the Philly Fed Survey on tap. Traders will be looking for signs of improvement in the jobs market in the months to come. The fact is that any meaningful improvement in payrolls is not expected any time soon and this is a concern for the holiday shopping season.

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