Digging Data Data Data Data Data

The June Consumer Price Index was reported out today and fell in line with expectations at 0.3%. This caused the true believers in a September Federal Reserve interest-rate hike to break out the dance records and party hats.

But just hold on a minute and let’s look at the overall data for the first half of 2015.

For the year to date, prices are actually -0.3% compared to the previous half year. Yes, prices were down for the last six months. What is even more interesting is that the second half of 2014 saw only a +0.3% rise. So, when we look at the last twelve months, prices are essentially unchanged. Flat. Pan-caked. Steam-rolled away to nothing.

When we examine the first half of 2014, we saw some inflation (1.2%), but not enough to call out the bucket brigade to douse the flames. In fact, the last year and a half has seen average monthly consumer price increases of only 0.066%.

Nevertheless, currency traders pushed the dollar higher and the euro lower anticipating a September rather than a December or early-2016 rate hike.

Now there are many other reasons the Fed might want to instigate a rate hike. They might want maneuvering room should the U.S. fall into a new recession. If your rates are close to zero, you can’t use negative rates as a truly effective tool. Ideological considerations may have finally unraveled the dovish coalition, hawks simply standing on the idea that a central bank simply can’t and shouldn’t leave rates so low for this long.

Certainly inflation can’t be the prime motive for a rate rise. And unemployment, which is seeing some decline, is nevertheless soft for the end part of a recovery cycle.

The stronger dollar hurt gold a bit, but the real body blow came from regular traders who pounded gold below 1130 for a short time. It was since recovered to the low 1130s.

The super-dollar pushed West Texas Intermediate down to the $50.80 area. Brent North Sea fell but it was barely noticeable.

In other data news, new home starts rose almost 10%, month over month. The great preponderance of the increase is in multi-family housing. Single-family housing is still soft. Holding back builders, too, is a shortage of skilled labor. Apparently the demand for even more housing – which is running at 1 million units per year – is being throttled by lack of qualified workers.

The easy answer to the why-is-that question is that many workers left the building trades because the industry has been slow for so long. Retirees represent a serious loss because they take their skills with them to the old fishin’ hole. More serious, though, is that for about seven years, young workers – apprentice level hires – have been absent on the job site. This creates a long-term shortage of young skilled workers.

In addition, many foreign workers have gone home, voluntarily or involuntarily. North Carolina has lost 2/3rds of its Hispanic workforce to deportation or those who became discouraged with their prospects in the U.S.

U.S. equities were mixed today. The Dow was off slightly and the S&P 500 was quietly up. The NASDAQ hit an intraday record largely on a move by Google to $700 per share, which it has since backed off from. Google had the best day of any stock ever today, by the way. The index is heavily weighted toward technology issues. It is up 19% in the last twelve months.

Bonds across the U.S. to Europe and Japan are flat on the day, most traders still pondering the ramifications of the Greece-EMU deal.

Wishing you as always, good trading,