Retail Sales Decline

December 13, 2002

· Finished producer prices were weaker than expected last month and fell 0.4%. Consensus expectations were for no change. It was the first decline in prices since July.

· Excluding food and energy prices also were weaker than expectations for no change. The 0.3% decline similarly was the first drop since July. Core producer prices were down 0.1% (AR, YTD).

· Finished energy prices fell for the first month since June (11.6% AR, YTD). Gasoline prices fell 11.6% (54.1% AR), reversing all of the prior month's jump, and fuel oil prices slumped 10.7% (45.1% AR, YTD). Residential gas prices also were strong for the second consecutive month (8.1% AR, YTD). These energy product price series are NSA.

· Core finished consumer goods prices fell 0.3% (0.2% AR, YTD). Consumer durables prices fell 0.7% and reversed all of the October jump as prices for passenger cars and household appliances fell. Other consumer durables prices were tame. Core nondurable goods prices rose 0.1% (1.3% AR, YTD. Capital goods prices fell 0.2% (-0.5% AR, YTD) as computer prices continued to decline.

· Food prices rose 0.3%, but it was only the second monthly rise since mid-year.

· Intermediate goods prices fell for the first month since February as energy prices fell. Core intermediate prices rose just 0.1% for the third consecutive month (1.8% AR, YTD).

· Crude goods prices were again strong (26.0% AR, YTD) reflecting higher energy prices. Other commodities prices reflected in the core crude price measure were strong reflecting higher scrap copper and aluminum prices. Steel scrap prices fell sharply for the second consecutive month.

Producer Price Index	Nov	Oct	Y/Y	2001	2000	1999
Finished Goods	-0.4%	1.1%	0.9%	2.0%	3.7%	1.8%
Core	-0.3%	0.5%	0.1%	1.4%	1.3%	1.7%
Intermediate Goods	-0.1%	0.7%	2.4%	0.4%	4.9%	0.1%
Core	0.1%	0.1%	1.4%	-0.1%	2.6%	-0.3%
Crude Goods	5.1%	3.4%	14.7%	0.3%	22.8%	1.5%
Core	0.4%	0.9%	11.6%	-9.9%	7.3%	-4.7%

Business Inventory Accumulation Continued

December 13, 2002

By Tom Moeller

· Total business inventories rose as expected in October. September's gain in inventories was revised up slightly due to raised figures for retail inventories.

· Retail inventories (7.4% YTD, AR) were strong for the second consecutive month led by a 3.0% jump in motor vehicle inventories, the second strong gain in a row.

· Nonauto retail inventories (1.8% YTD, AR) fell for the first monthly decline since March. Inventories of furniture & home furnishings were unchanged following earlier strength (10.1% YTD, AR). Inventories at apparel stores slumped 1.2% (1.7% YTD, AR). At general merchandise stores inventories rose a modest 0.2% (-0.9% YTD, AR) for the second consecutive month.

· Overall business sales rose 0.4% (4.2% YTD, AR).

· The inventory-to-sales ratio fell slightly to 1.36 from an upwardly revised September level.

Business Inventories	Oct	Sept	Y/Y	2001	2000	1999
Total	0.2%	0.6%	-0.6%	-6.3%	5.6%	5.4%
Retail	0.7%	1.3%	5.3%	-5.0%	6.1%	7.7%
Retail excl. Autos	-0.4%	0.7%	0.7%	-2.0%	4.1%	5.7%
Wholesale	-0.3%	0.4%	-3.0%	-5.5%	6.6%	6.0%
Manufacturing	0.0%	0.2%	-4.4%	-8.0%	4.5%	3.1%

Consumer Sentiment Up in Early December

December 13, 2002

By Tom Moeller

· The preliminary December reading of Consumer Sentiment from the University of Michigan rose more than Consensus expectations for a rise to 85.0. Sentiment has rebounded 7.9% during the last two months.

· Indexes of current conditions and expectations both rose.

· Over the last 10 years there has been a 40% correlation between the annual change in consumer sentiment and the change in stock prices. That correlation rose to 62% during the last five years

· The University of Michigan survey is not seasonally adjusted.

University of Michigan	Prelim. Dec	Nov	Y/Y	2001	2000	1999
Consumer Sentiment	87.0	84.2	-2.0%	89.2	107.6	105.8

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