December CPI and Retail Sale Missed Expectations

The retail sale data in December come as 0.6% growth with expectation of 0.8%.  With the gasoline price flying, the CPI in December increases by 0.5%, missing market expectation of 0.4%.  Note that when consumers spend more on the gas that stimulates import they will cut spending on others that would have generated growth.  Factoring inflation, there is no much growth of the consumer demand in December.

Also reported today is the business inventory in November that comes as just 0.2%, even lower than the 0.7% growth in October and missed the expectation of 0.8%.  Considering the wholesale inventory in November shank 0.2%, the inventory contribution to the U.S. economy should also be fading.  But the GDP looks pointing to a 4% expansion throughout Q4, 2010 regardless of the shrinking inventory growth.  This may suggest that the business investment and government spending in Q4 may be the factor to make up the difference.  I will be continuing to monitor this inventory fading trend and their impacts on the GDP in 2011.

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