PPI Data

by Larry Levin

Inflationary data just keeps rolling in higher. Today's PPI data was no exception coming in at a staggering 1.4% headline number, while the core was, oh who cares. By the way, that 1.4% monthly figure was also a seasonally adjusted number. Said another way, it would have been higher if our friends at the Bureau of Labor & Statistics (BLS) didn't massage the figures. If you believe this core number send me an email, I have some old stuff in the basement that I want to sell as new and I'm looking for suckers who will believe anything and everything.

Yes sir, wholesale prices skyrocketed while housing and industrial activity continued to tail off, giving us a blend of high-costs and slow growth. I'm guessing that this cements the notion that the Federal Reserve's next move on interest rates will be no move whatsoever. We find out next week.

BREAKING NEWS: Smoke seen rising from the top of Labor Department building. Fire Department says likely cause is cooking of the inflation books; there is no need to panic.

As mentioned above, U.S. wholesale prices spiked 1.4% in May, after seasonal adjustments, with energy prices gaining 4.9% and food prices rising 0.8%. In the past year, the (PPI) producer price index, which tracks inflation at the wholesale level, gained 7.2%, the government said. Economists had been expecting the headline number to be .9%, which underscores the notion that economist's expectations are worthless. Once again they were off by a large margin of 50%.

As prices in May for finished consumer foods rose, prices for pork gained 8%, the largest change since 1999, and prices for fresh fruits and melons rose 5.9%. Further back in the production pipeline, prices for intermediate goods gained 2.9% in May. The core intermediate PPI, considered a key leading indicator of inflation, gained 2.0% in May, the largest change since early 1980!

Pipeline inflation pressures may mean that the BS from the BLS regarding core PPI may be coming to an end. That is, until they find a new way to lie to you.

The Federal Reserve reported that industrial production fell 0.2% in May, the second straight monthly decline and the third time in four months. Plants operated at only a 79.4% capacity, the lowest since September 2005 after the Gulf Coast hurricanes.

The number of new housing projects started in May fell 3.3%, the lowest in 17 years, as builders pulled back further. Builders are dealing with the level of unsold and foreclosed homes piling up, adding to already swollen supply. Falling demand from would-be buyers and rising mortgage rates are adding to builder headaches.

Real Time Trading Signals*for

Trade Date: 6/17/08

E-Mini S&P Trades*
(before fees and commissions):

1) OTF sell @ 10:00am at 1365.00 = +1.50 & +6.50

2) OTF sell @ 11:00am at 1359.75 = +4.75 (1 lot)

3) FT sell @ 12:20pm at 1360.50 = +.50 (1 lot)

4) VA buy @ 1:05pm at 1358.00 = -1.00 (1 lot)

5) VA sell @ 1:45pm at 1358.00 = -1.75 (1 lot)

6) Algorithm trades (2)combined total +10.75

E-Mini Russell Trades*
(before fees and commissions):

1) Sell @ 9:15am at 738.6 = -1.0 (1 lot)-$100


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