Morning Report: Inflation at the wholesale level hits a record

Vital Statistics:

  Last Change
S&P futures 4,696 2.2
Oil (WTI) 82.22 0.33
10 year government bond yield   1.44%
30 year fixed rate mortgage   3.17%

Stocks are flattish this morning on no real news. Bonds and MBS are up small.


Inflation at the wholesale level rose 0.6% MOM and 8.6% YOY. Ex-food and energy, they rose 6.8% on a YOY basis. About a third of the increase was due to higher gasoline prices. The producer price index is upstream of the consumer price index, which means it will percolate down to the consumer level. While the history of the PPI doesn’t go back as far as the CPI, we are seeing record inflation.


Small business optimism slipped again, according to the NFIB Small Business Optimism Index. This is the lowest overall reading since March of this year. “The Optimism Index decreased slightly in October by 0.9 points to 98.2. One of the 10 Index components improved, seven declined, and two were unchanged. The NFIB Uncertainty Index decreased 7 points to 67. Owners expecting better business conditions over the next six months decreased 4 points to a net negative 37 percent. Owners have grown pessimistic about future economic conditions as this indicator has declined 17 points over the past three months to its lowest reading since November 2012.

You can see the increase in prices below, which corroborates the PPI:


Mortgage credit availability increased in October, according to the MBA. “Credit availability inched forward in October, but the overall index was 30 percent lower than February 2020 and close to the lowest supply of mortgage credit since 2014,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Within the subindexes, a 4 percent increase in the jumbo index was essentially offset by a 6 percent drop in the conforming index. There was an increase in the supply of jumbo ARM and non-QM products, which drove most of the increase in the jumbo index. On the conforming side, there was a pullback in ARMs, higher LTV loans, and lower credit score products.


Home prices rose 18% in September, according to CoreLogic. They see home price appreciation moderating to only 2% over the next year, however. The flight out of urban areas into the suburbs and exurbs continued, however CoreLogic sees that trend reversing over the next year.

10 Responses

  1. Soothsayer ScottC, August 2020

    I doubt this will ever be over. Covid is a part of the landscape now. And even if a vaccine were created, how can we justify the tens of thousands of flu deaths we always experience if social distancing measures can prevent them, too? Masks now and forever!

    CDC Director Rachel Walensky, 3 days ago:

    Masks help reduce your chance of Covid 19 infection by more than 80%. Masks also help protect from other illnesses like cold and flu. Wearing a mask – along with getting vaccinated – are important steps to stay healthy.


    • I feel this will ultimately become “guidance” for most people in most places. They try to mandate permanent COVID restrictions, they will be voted out. Or legally challenged in perpetuity by states where the COVID-obsessed have been voted out or were never voted in.

      In the US, anyway. Elsewhere I’m not so sure.


    • We could completely eliminate highway fatalities by setting the speed limit at 4 miles per hour.


    • The MSM is deeply disappointed in Aaron Rodgers


  2. Very interesting article from The Spectator on the transformation of the NYT:

    The New York Times entered the digital era under duress. In 2011, the Times erected a paywall in what it called a ‘subscription-first business model’. The gamble was that readers would want to pay for quality journalism. It was a risk, and at first it didn’t seem to be paying off: after a challenging 2014, the company shed 100 people from the newsroom in buyouts and layoffs.

    A.G. Sulzberger, who was getting ready to replace his father as publisher, commissioned an in-house report, its title ‘Innovation’. The report made it very clear who was to blame. A journalist’s job, the report said, no longer ended with choosing, reporting and publishing the news. To compensate for the ‘steady decline’ in advertising revenue due to digitisation, ‘the wall dividing the newsroom and business side’ had to come down. The ‘hard work of growing our audience falls squarely on the newsroom’, the report said, so the Times should be ‘encouraging reporters and editors to promote their stories’.

    Of course, journalists have always been aware who their readers are and have catered to them, consciously and unconsciously. But it was something else entirely to suggest that journalists should be collaborating with their audience to produce ‘user-generated content’, as the report put it. ‘Innovation’ presaged a new direction for the paper of record: become digital-first or perish.

    The Times invested in new subscription services like NYT Cooking and NYT Games, and introduced live events, conferences and foreign trips. The paper hired an ad agency to work in-house and began allowing brands to sponsor specific lines of reporting. Journalists were asked to accompany advertisers to conferences and were pushed to collaborate more closely with the business side, something many of the old-school editors were loath to do. The executive editor at the time, Jill Abramson, resisted strenuously. She was given the boot.

    And then came Trump.


    • I’ve been watching the Rittenhouse trial, off and on and the defense just called him to testify and he’s taking the stand. Live streams are all over youtube. I can’t remember the last time, in a high profile case that a defendant testified. Considering how well the defense has been doing I’m baffled by this move.


      • Yeah that makes zero sense. I was reading speculation that things were going so good for them that there was a potential that they might rest after the prosecution did without calling any witnesses of their own.


      • I’m reading live updates at Legal Insurrection, but not watching. Is the Judge going berserk? Sounds like he is screaming at the prosecutor.


    • That was a good article Scott.

      Taibbi also called it with Hate, Inc.


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