What I Saw Last Week

U.S. Retail Sales rose 1.6% in September, as expected, with increases in gasoline station (+5.8%), auto (+3.6%), and building material (+2.1%) sales all getting a hurricane-related boost and leading the way.

Excluding transportation, auto sales increased 1.0% on the heels of an upwardly revised 0.5% increase (from +0.2%) in August.

Retail Sales

The takeaway from the report is that core retail sales, which exclude auto, gas, building material, and food services and drinking place sales, and which factor into GDP computations, increased a solid 0.6%.

Inflation, as measured by the Consumer Price Index featured a 0.5% increase in total CPI and a 0.1% increase in core CPI (which excludes food and energy). Of note is that the gasoline index rose 13.1% and that component accounted for about three-fourths of the increase in total CPI.

CPI

The headline numbers were a little softer than expected, which will create some chatter that they could sway the Fed into thinking that it would be prudent to hold off on a rate hike at its December meeting. That said, my money is still on rate increase in December.

The takeaway from my vantage point, though, is that the September CPI report hasn’t run afoul of the Fed’s price stability mandate. To that end, total CPI is up 2.2% year-over-year, versus 1.9% in August, and core CPI is up 1.7% for the fifth month in a row.

The preliminary University of Michigan Consumer Sentiment Index for October checked in at 101.1 which was up from 95.1 in September and the highest reading for the index since the start of 2004.

Sentiment

Consumers in general anticipate low unemployment, low inflation, small increases in interest rates, and modest income gains in the year ahead. According to the report provider, consumer attitudes reflect a sense that economic prospects are about as good as could be expected.

The takeaway from the report is that the positive sentiment occurred among all age and income groups and across all partisan viewpoints. That should presumably bode well for consumer spending, which is the most important driver of GDP growth.

What to Watch for This Week

The NAHB Housing Market Index for October should see an increase from the September number of 64 to 66.

U.S. Housing Starts were running at an annual rate of 1.3M units in August and the September figure should pull back to an annual rate of 1.160M.

U.S. Building Permits were measured at an annual rate of 1.3M in August.  I think that we will see a drop to 1.225M when the September numbers are released on Wednesday.

U.S. Existing Home Sales in August were measured at an annual rate of 5.35M.  The September figure should show a pullback to 5.29M units.

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