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By The Numbers

January 14, 2011 – 6:04 pm

This morning December retail sales final numbers came in and they were slightly less than expected which was a surprise. I think most expected the number to be higher than expected.

Inflation numbers came in as well and the core rate for December was up .1% with the overall number up .5% mostly due to higher gas prices. For 2010 the yearly inflation rate fell to .8% which is a record low. That will be changing this year. Expect it to begin to rise. Food prices and oil have already risen sharply.

Finally, this morning we had Industrial production which was up .8% and capacity at 76% both numbers were expected. A normal industrial capacity number is about 80% so we still have some room to grow before our ability to produce goods starts to squeeze. Add that room to the massive unemployed and underemployed and there is no reason to suspect inflation will become uncontrollable. Prices of goods are rising but salaries are not and will not for some time. Both salaries and prices have to be rising to have inflation begin a cycle that is very difficult to stop. Usually the effort to stop it is pushing interest rates higher thus slowing the economy. We certainly do not want to do that at this point.

Good Trading
Steve Peasley

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