US consumer prices fall but manufacturing holds up

Yesterday's report on US consumer prices showed a large drop in November. Reuters reports:

The 0.6 percent drop in consumer prices last month, led by a 16 percent drop in the cost of gasoline, was slightly larger than the 0.4 percent reversal expected by Wall Street and was the biggest decrease since July 1949.

Excluding food and energy costs, so-called core inflation rose 0.2 percent in November, in line with market forecasts...

Over the past year, consumer prices have climbed 3.5 percent, a slowdown from October's 4.3 percent inflation rate... The annual increase in core inflation...remained at a comparatively tame 2.1 percent in November.

This report from the US follows those in Europe over the past few days showing falls in consumer prices in November (see my previous two posts).

There were also plenty of other economic news from the US.

A separate report from the Fed showed output from U.S. factories, mines and utilities rose a better-than-expected 0.7 percent in November, pushed higher by a post-hurricane recovery in the petrochemical and energy sectors.

The gains were echoed in a report from the New York Fed Bank showing an unexpected jump in manufacturing conditions in that state, with new orders up but shipments and employment down...

A report from the Philadelphia Fed Bank showed factory activity in the U.S. Mid-Atlantic region improved slightly in December while new orders slipped.

The Philadelphia Fed's business activity index edged up to 12.6 in December from 11.5 in November, below Wall Street forecasts for a rise to 14.0...

Separately, the Labor Department reported the number of U.S. workers filing new claims for jobless aid rose 1,000 last week to 329,000, bucking expectations for a small decline.

A four-week moving average of claims, which smooths weekly volatility to provide a better picture of the job market, rose 6,000 to 328,750, the highest in five weeks.

Overall, a rather mixed batch of data from the US. Indeed, Asha Bangalore at Northern Trust warns us to read beyond the headline numbers. On inflation:

The headline number speaks only for the decline in petroleum based energy prices... The mix of price data is still biased toward higher prices, which makes it almost certain that the Fed will raise the federal funds rate to 4.50% at the close of the January 31 FOMC meeting.

On manufacturing:

These sharp increases in industrial production in the October-November period reflect recoveries after the hurricanes in the petrochemical and energy industries... The underlying momentum of the factory sector is more moderate than what the October and November data convey.

On jobless claims:

After adjusting for hurricane-related filings, seasonally unadjusted initial claims rose 4.6% on a year-to-year basis. This bodes poorly for the labor market.

At least, though, there was something to cheer about in the UK. From another Reuters report:

British retail sales rose at their sharpest rate in five months in November, in a further sign that consumer demand is picking up and boding well for the key Christmas shopping season.

The Office for National Statistics said on Thursday that sales rose 0.7 percent last month after an upwardly revised 0.4 percent in October. This was more than double analysts' forecasts and took the annual rate to 2.1 percent...

Prices on average were 1.1 percent lower than a year ago.