US economic data released over the course of the morning has been broadly disappointing, with one better than expected indicator proving to actually be somewhat deceptive.
First, the US producer price index jumped by the most in 6 months during the month of January at a rate of 0.8 percent due primarily to an increase in consumer good costs, including women's apparel, residential electricity, gasoline, prescriptions, passenger cars, and tobacco goods. However, the cost of crude and intermediate goods actually fell in January, at rates of -2.9 percent and -0.7 percent, respectively. This suggests that producers aren't necessarily passing these lower costs on, and may also indicate that Friday's release of the US Consumer Price Index (CPI) could be a bit stronger than anticipated.
On the labor front (see chart below), US initial jobless claims for the week ending February 14 held steady at 627,000, but that was only because the previous week's result was revised up from 623,000. Meanwhile, continuing jobless claims for the week ending February 7 surged by 170,000 to a fresh record high of 4,987,000, signaling that the deterioration in the labor markets is sure to continue in line with the Federal Reserve's forecasts that the unemployment rate may rise as high as 8.8 percent this year, if not higher.
In the meantime, the Philadelphia Fed's manufacturing activity index tumbled to -41.3 for the month of February, marking the lowest since October 1990. The decline is in line with the drop in the New York Fed's Empire manufacturing index, which also reflected contracting prices, falling new orders, and hefty job losses.
Finally, the Conference Board's leading economic indicator index rose for the second straight month by 0.4 percent in January to 99.5. This was much better than forecasted, but in reality there were few high points in this actual report since the bulk of the gain was due to a 0.54 percent rise in M2 money supply, which has only ballooned over the past 5 months because of the Federal Reserve's efforts to boost liquidity. Indeed, most other components were disappointing, including the average workweek, jobless claims, building permits, and stock prices.
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