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Several economic reports out this week. The 3^rd quarter GDP number was released on Wednesday at up 2.8 percent (Advanced Estimate) which was in line with expectations and did not move the markets significantly. Much of the increase came from government spending. On Friday, the employment report for October showed 12,000 jobs were created against an estimate of 100,000. The markets reacted positively to the news with gains across the board. Two reports were inflation-related.

On Wednesday, the Consumer Price Index (CPI) for September was released and the core (less the volatile food and energy components) number was up.1% to 3.3% versus August’s 3.2%. In-line with expectations as they say. Expectations or not, a higher inflation number is higher inflation.

On Thursday, the Personal Consumption Expenditures Index (PCE) (the FED’s favorite inflation gauge) was released and the core number, which is the one the FED watches most closely, increased .3% to 2.7%., above the FED’s inflation goal of 2%. Yet, the financial news people were celebrating a small increase. Inflation is inflation.

Most markets reacted negatively on Thursday, with the major stock indices down form the previous day along with gold and silver. The financial news reporters are calling it profit taking from the recent run-up in the metals. For decades my response to that has always been I want to know who is taking profits. It can’t be everybody especially the investors who purchased higher!

Regardless of the positive spin on the inflation numbers, my feeling is that the inflation numbers continue to be too high and persistent putting a dampening on the potential of the FED lowering interest rates as quickly as the markets would like. Buy the dip.

Until next time…

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