Today's Fed Speeches and Data Round-Up

Going through today's speeches of Fed members only Fed Chicago president Michael Moskow offered some views on current economic developments over breakfast at Maggiano's Little Italy. Governor Mark Olson delivered a history of the US banking and payments system to a Retail Banking Forum in Brussels and vice chairman Roger Ferguson gave a rather technical speech on causes and implications of asset prices and volatility to the Bank of Mexico's conference. Chairman designate Ben Bernanke outlined the advantages of an inflation target at his nominee hearing at the Senate Banking Committee but assured participants he would not move quickly.

GRAPH: Producer prices rose 5.9% on an annual basis but the explosive price rises in intermediate and crude goods are much more worrying. Chart courtesy of Econoday.

Producer prices of finished goods came in at a monthly rate of 0.7% (September: 1.9%) but a look on page 2 shows annual price growth of 10.5% (8.4%) for intermediate and 31.5% (28.5%) for crude goods. Finished goods became 5.9% (6.9%) more expensive year-on-year. These explosive numbers have to drip through into both headline CPI and the core rate.
Moskow said he expects the US economy to grow by 3.5% this year and 3.3% in 2006. He cited softening home prices and elevated energy prices as the two biggest threats, latter posing a risk for the inflation outlook as well. His question whether business will pass through higher energy costs to consumers is partially answered by the steep PPI rises for crude and intermediate goods. The trend in the PPI can become subject to a sharp acceleration should the 11 month old dollar-rally come to an end when other central banks start to raise interest rates, a development Alan Greenspan warned about yesterday.
Other economic data came in better and above consensus expectations. Retail sales fell 0.1 % (consensus minus 0.6%) and rose ex autos 0.9 (consensus 0.3%). The NY Empire State Index jumped from 12.1 to 22.8 (consensus 17.0).
All this led to modest advances only in the share market where recent advances were not bolstered by crude oil futures staying below $58 per barrel. I also miss sufficient volumes in the last days to call this a genuine bull market.