PPI, Inventory Reports Dark; Consumer Sentiment Up

Inventories at U.S. businesses rose 0.5% in September, and business sales also fell by 0.5%, the Commerce Department said.

"That is not surprising. We had a massive liquidation of inventories, then trucking saw a boost, as did manufacturing," said Bob Costello, chief economist for American Trucking Associations. "It shows that we did deliver more goods and got inventories back up to a more normal level. It just sort of confirms what we saw in the industry."

In a second report, this one on producer prices, the Labor Department said that the prices paid to U.S. manufacturers, farmers and other producers rose 1.1% during October. The rise could be indicative of a return to inflation, but most analysts said that there is still very little fear of inflation, Bloomberg News reported.

The core rate of PPI, which discounts volatile food and energy costs, rose 0.5%. If vehicle prices are excluded, producer prices only rose 0.1%. The spike in vehicle prices was most likely caused by the discontinuation of discount pricing used to clear out vehicles at the end of the model year, Bloomberg said.

Another potential cause for the jump in prices is the 10-day shutdown of ports on the West Coast. In addition to vehicle prices, prices fresh fruit and other perishable foods "turned up" in October, according to the report. Analysts attributed this to foods spoiling while waiting to be offloaded during the port closure.

In a bit of offsetting news, a preliminary look at the University of Michigan index of consumer sentiment saw the index rise to 85.0 in November from 80.6 in October.

The rise in the index gave hope to analysts that American consumers would continue to spend through the holiday season and help hold up the fragile economic recovery, Bloomberg reported.