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- The core producer price index (PPI), which is expected to fall 0.2 percentage points (after dropping 0.3 percentage points in August), thanks to the blow-off in commodity prices and the slowing global economy. Inflation trends are also benefiting from the recent dollar rebound, which lowers the cost of imports. However, if the rising budget deficits lead to erosion in confidence for the dollar, inflation concerns may re-emerge. At a minimum, interest rates could move higher to attract sufficient interest in our rising bond issuance.
- Retail sales are expected to fall by a few percentage points, although the fall-off is likely to appear steeper when auto sales are included. As I noted yesterday, retail sales are likely to stay in a funk through the all-important holiday season, which could lead to liquidity concerns for some players.
- We'll also get a reading on the Fed's beige book, crude oil inventories and business inventories on Wednesday. This week's stunning spike in oil and gasoline inventories is welcome relief, and the trend is likely to continue as global production ramps and consumption cools. We may soon see $70 oil if this trend continues, though further pullbacks are likely to be met with OPEC saber-rattling.