The Labor Department reported today that the Producer Price Index had risen by 0.5% during November. This was the largest monthly rise since January, and created quite a stir among inflationophobic bond traders. But, 75% of the rise was due to the appearance for the first time of prices for 1996 model automobiles. So, if the new car effect is ignored, the rise would have only been 0.125% -- right in line with the stable behavior of this index that we have seen for the past several months. The car makers may want to charge higher prices for their new cars. But, this may be wishful thinking, given the present mood of consumers. We'll get another take on the inflation picture tomorrow with the release of the November Consumer Price Index report.

Speaking of consumers and their moods, let's take a look at today's news from the retail sector. Mitsubishi Bank/Schroeder-Wertheim reported that chain store sales for the week ended December 9 were up only 0.1%. This follows drops of 0.2% in each of the two preceding weeks. The Johnson-Redbook Survey reported that during the first two weeks of December sales had dropped 2.0% compared with November.

Perhaps the most telling report on retail sales was today's report on data compiled by TeleCheck Services. TeleCheck, the country's largest check acceptance company, reported that, during the first 17 days of the Christmas shopping season, same-store sales had fallen by 7.2% compared with the same period last year. An interesting sidebar to the TeleCheck report was the data for Maryland and the District of Columbia. Maryland dropped 10.3% and the District slumped 9.2%. Last week I suggested that the uncertainty in Washington regarding government shutdowns was going to throw a wet blanket on federal employees' spirit of spending. Looks like I was right. We'll get another reading on retail sales tomorrow when the Commerce Department releases its report for November.

Today the National Association of Purchasing Management released the results of its semi-annual member survey on the economic outlook. The respondents concluded that manufacturing revenues would expand in 1996 by 4.8%. Revenues for 1995 were expected to come in at the +7.4% level. The NAPM members concluded that the slowdown in '96 would lead to still further cuts in manufacturing employment. Finally, the survey participants concluded that the slowdown in the manufacturing sector was due to sluggish consumer spending.

In Atlanta today, the Federal Reserve District released the results of its economic survey for November. The Atlanta Fed found that many southeastern manufacturers reported decreases in production during November. The district's business activity index fell to -13.1 from a reading of -4.5 last month. Inflation, as measured by the District's prices paid index, dropped from a reading of 12.6 in October to 5.4 in November. It doesn't seem like they're buying a lot of high-priced new cars in Atlanta.

Byline: Lafferty (MF Merlin)