Oil prices jump after Iran says critical Strait of Hormuz to remain shut
The December retail sales report was excellent and will help to sustain strong GDP growth. The Commerce Department announced that retail sales rose 0.6% in December, which was better than economists’ consensus estimate of a 0.5% increase. October retail sales were revised to a 0.1% decline, down from the initial estimate of a 0.2% increase. Fully, 10 of the 13 categories surveyed reported a sales increase in November.
Meanwhile, the PPI came in below economists’ consensus expectation of 0.3%, and much of the price increases were energy related. The Labor Department announced that the Producer Price Index (PPI) in November rose by 0.2% and 3% in the past 12 months. The core PPI, excluding food, energy, and trade margins, also rose by 0.2% in November and 3.5% in the past 12 months. Wholesale food prices were unchanged, but wholesale energy prices rose 4.6% in November. The price for wholesale goods rose 0.6% in November, while wholesale service costs rose only 0.2%.
The Labor Department on Tuesday announced that the Consumer Price Index (CPI) in December rose 0.3% and 2.7% in the past 12 months. Excluding food and energy, the core CPI rose 0.2% and 2.6% in the past 12 months, which was better than economists’ consensus estimate of 0.3% and 2.7%, respectively. Food prices rose 0.7% in December, while gasoline prices declined 0.5%. Owners’ equivalent rent (shelter costs) rose 0.3% in December and accounted for much of the CPI increase, but shelter costs are expected to cool in the upcoming months. The federal government shutdown distorted some of the data collection, so the December CPI is not expected to impede any Fed cuts.
Fed Chairman Powell is testifying before Congress this week, and the DOJ grand jury subpoena is expected to dominate his testimony. So, unfortunately, there is not expected to be any groundbreaking economic news, since Chairman Powell has become a political piñata for Congress to bash.
The DOJ investigation is about the $2.5 billion construction project at the new Fed headquarters. Obviously, if Fed Chairman Powell is being investigated by the DOJ, it may be hard for him to do his job. So, the real question is, was the DOJ investigation intended to oust Chairman Powell? This potential threat to Fed independence has rattled the currency market, since the U.S. dollar sold off in the wake of the DOJ investigation news.