Morning Report: Mixed bag of inflation data

Vital Statistics:

S&P futures3,948-15.25
Oil (WTI)71.93 0.43
10 year government bond yield 3.53%
30 year fixed rate mortgage 6.35%

Stocks are lower after the Producer Price Index came in hotter than expected. Bonds and MBS are down.

Inflation at the wholesale level picked up in November, according to the BLS. The Producer Price index rose 0.3% MOM and 7.3% YOY, which was driven primarily by final demand servicers, which is basically wages. The PPI ex-food and energy rose 0.3% MOM and 6.2% YOY. This report is one of the last pieces of data before the Fed meets next week.

Consumer sentiment improved in the early part of December, according to the University of Michigan Consumer Sentiment Index. All three components improved on a MOM basis, but are still lower than a year ago. This probably reflects falling gasoline prices – these consumer confidence indices generally correlate negatively with gas prices.

Inflationary expectations eased again, which is good news for the Fed. Inflation expectations hit a 15 month low, but are still higher than a couple of years ago.

Home equity increased 15.8% YOY in the third quarter, according to data from CoreLogic. This works out to be about a $34,300 gain on the average mortgaged home. Negative equity is still an issue in the Midwest and Northeast.

“At 43.6%, the average U.S. loan-to-value (LTV) ratio is only slightly higher than in the past two quarters and still significantly lower than the 71.3% LTV seen moving into the Great Recession in the first quarter of 2010. Therefore, today’s homeowners are in a much better position to weather the current housing slowdown and a potential recession than they were 12 years ago. Weakening housing demand and the resulting decline in home prices since the spring’s peak reduced annual home equity gains and pushed an additional number of properties underwater in the third quarter. Nevertheless, while these negative impacts are concentrated in Western states such as California, homeowners with a mortgage there still average more than $580,000 in home equity.”

17 Responses

  1. Good read:

    “People are upset that PVC or SPF or DMC or whatever his name is hasn’t been charged and arrested yet. I’ve been asked to explain, in a diplomatic and respectful way, why this might be.”


  2. Taibbi’s latest:

    “The Twitter Files
    Part One: October 2020-January 6th”

    & update on Substack:


  3. Surely this neo-racist program is illegal. And yet it is being “expanded” rather than already having been shut down. WTF is going on?


  4. The commentary and headline are annoying, but the interview transcript is interesting.


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