US: Latest data supports December Fed hike - Wells Fargo

According to analysts from Wells Fargo, economic data released during the week support an interest rate hike from the Federal Reserve in December.

Key Quotes: 

“A slew of economic data were released in the United States ahead of the short holiday week. Three of the leading U.S. inflation indicators, the consumer price index, the producer price index and the import price index, collectively showed a firming of price growth in October. Although the headline CPI decelerated slightly in October, the slowdown reflected a decline in energy prices as the supply disruptions surrounding Hurricanes Harvey and Irma abated. Excluding food and energy, inflation was noticeably stronger. Core services have been the primary source of inflation weakness this year, but services prices rose 0.3 percent in the month, while core goods prices also posted a rare increase.”

“For the second consecutive month, the PPI for final demand beat expectations, rising 0.4 percent in October. Core producer prices, excluding energy, food and trade services, reached a fresh record high for this relatively new (2013) series. In addition, the import price index showed the strongest rate of nonfuel import price inflation in more than five years. On balance, inflation has not rebounded sharply from its recent slowdown, but neither has it continued to fall. As a result, the stabilization of price growth and our expectation that it will slowly pick up should keep the FOMC on the path of gradual rate increases in the months ahead.”

“Industrial production jumped 0.9 percent in October, led by a 1.3 percent surge in manufacturing output, which matched the largest monthly increase since 2010. The factory sector has been held back over the past few months as Hurricanes Harvey and Irma knocked some capacity offline that has only now begun to swing back in full force. The Federal Reserve, which produces the industrial production statistics, estimates that, excluding the effects of the hurricanes, output advanced just 0.3 percent for the total index and 0.2 percent for manufacturing.”

“Retail sales rose 0.2 percent in October. Over the past year, sales are up 4.6 percent amid strength in building supplies and non-store retailers.”