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Inflation Absent at Wholesale Level.

Wednesday, November 16, 2016 8:40
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MBA Mortgage Applications (week ended 11/11/2016)

– Purchase Index Week/Week -6.0%. Previous weeks were +1.0%, -0.4%, -7.0%, +3.0%, -3.0%, -0.1%, +1.0%, -7.0%, +9.0%, +1.0%, +1.0%, -0.3%, and -4.0%.
– Refinance Index Week/Week -11.0%. Previous weeks were -3.0%, -2.0%, -2.0%, -1.0%, -8.0%, +5.0%, -2.0%, -8.0%, +2.0%, +1.0%, +4.0%, -3.0%, and +10.0%.
– Composite Index Week/Week -9.2%. Previous weeks were -1.2%, -1.2%, -4.1%, -0.6%, -6.0%, +2.9%, -0.7%. -7.3%, +4.2%, +0.9%, +2.8%, and -2.1%.

Higher rates resulted in fewer refinance applications. I do not buy the idea that somehow the President-elect is going to stimulate the economy and cause inflation. This is an excellent
example of markets overreacting.

PPI-FD (October 2016)

– PPI-FD month/month +0.0%. Previous was +0.3%
– PPI-FD year/year +0.8%. Previous was +0.7%
– PPI-FD less food & energy month/month -0.2%. Previous was +0.2%
– PPI-FD less food & energy year/year +1.2%. Previous was +1.2%
– PPI-FD less food, energy & trade services month/month -0.1%. Previous was +0.3%
– PPI-FD less food, energy & trade services year/year +1.6%. Previous was +1.5%

This is inflation or rather the lack of it at the wholesale level.

Industrial Production (October 2016)

– Production month/month +0.0%. Previous was -0.2%
– Manufacturing month/month +0.2%. Previous was +0.2%
– Capacity Utilization Rate 75.3%. Previous was 75.4%

Year/year IP is down for the 14th consecutive month. One sector which has helped IP over the past couple of years is autos which have been boosted by weakened lending standards. Look for
auto production to start to head downward and take a bite out of IP. This is a Zerohedge piece  points out that 25% of the people who are trading in their vehicle
to buy a new one owe more on their old car that the loan balance and are financing that deficit with the loan to buy the new vehicle. These guys copied the 125% LTV model from the
mortgage industry. Remember how that went?

Housing Market Index (November 2016)

– Index 63. Previous was 63.

This is the result of a survey of the National Association of Home Builders. Let’s see how it fares next month after the recent spike in rates.

Atlanta Fed Business Inflation Expectations (November 2016)

– Business Inflation Expectations year/year 2.0%. Previous was +1.7%


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