It’s getting a little nervous……
Let me explain:
- Retail sales were up and they weren’t up strictly because of the “Cash for Clunkers” program. That’s a good thing economically but not so much from an inflation standpoint.
- The Producer Price Index was higher than expected.
- A relatively minor manufacturing report came in better than expected.
All three of them are not “market moving reports” in themselves. But all three of them provide insight into a chain of events that might be building up. Let me lay out that scenario:
- Retail sales are up.
- Inflation on the wholesale level is up.
- Manufacturing is up.
- All of these could potentially be signs of inflation.
- Inflation brings higher rates.
Have rates changed today? Very little. But the nerves are a little more “jumpy.”
So, with the Consumer Price Index coming out tomorrow morning, what’s my recommendation? I’ve adjusted it a little. I’m changing from “cautiously floating” to VERY Cautiously floating. Why’s that?
Basically, the news that came out today is tipping the scales slightly towards higher rates rather than lower rates. Not enough to make me recommend “lock” but closer than we were yesterday.
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