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The Commerce Department reported Friday retail sales jumped 0.6% in August, two times more than what economists expected and the reading in August, which were both 0.3%. The report illustrated that Americans are still spending money, an important fact as 70% of the GDP comes from consumer spending. The main catalyst for the strong numbers was car sales, which jumped 1.2% in September. Excluding auto and parts dealers, sales increased 0.4%, which was in-line with what economists expected. Sales at electronic stores were up 0.9%, mail order and internet retailers' sales jumped 1.1%, and health and personal care stores sales increased 1.0%. Sales dropped 0.6% at furniture stores, 0.7% at sporting goods, hobby and book stores, and 0.4% at clothing stores.

The producer price index for finished goods was up 1.1% in September, according to the Labor Department. Though the PPI reading was more than the 0.5% economists estimated, investors were encouraged by the core PPI, which excludes food and energy, inching up only 0.1% versus forecasts of 0.2%. Energy prices surged 4.1% and food prices climbed 1.5% in September. For the third quarter, the PPI increased at an annual rate of 1.4%, and the core PPI jumped 2.4%. There is no consensus on what the Fed will do in its next meeting in late October, but we can be sure it will be watching inflationary readings like the PPI to get an idea what an easing or tightening would do to our economy.

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Source: Strong Retail Report, Core PPI Boost Futures