What I Saw Last Week

All measures of Inflation, as measured by the Consumer Price Index, matched my forecast with the overall rate rising by 0.1% and the core rate rising by 0.2%.


A 0.3% increase in the shelter index drove the all items increase, which was mitigated by a 1.0% decline in the energy index and the food index being unchanged for the month.

Core CPI was also pushed up by the shelter index, as well as increases in the indexes for medical care, used cars and trucks, tobacco, education, motor vehicle insurance, and personal care.

On a year-over-year basis, the all items index rose 2.0%, versus 2.2% for the 12 months ending September. Core CPI increased 1.8%, breaking a five-month string in which core CPI was up 1.7% year-over-year.

The takeaway from the report is that inflation pressures are still not acute, yet they are likely not weak enough to persuade the Federal Reserve from raising the fed funds rate again at its December meeting.

U.S. Retail Sales in October rose by 0.2% (I had forecast 0.1%) and the core rate (ex-autos) also rose by 0.1% – I had forecast 0.2%.

Retail Sales

There was continued strength in discretionary spending areas; furniture and home furnishing stores (+0.7%), electronics and appliance stores (+0.8%), clothing and accessories (+0.8%), sporting goods, hobby, and music stores (+1.5%), and food services and drinking places (+0.8%).

The takeaway from the report is that it isn’t as soft as it appears at first blush, as there was an unwinding of some of the hurricane-related sales strength that led to the remarkably strong sales activity in September.

The NAHB Housing Market Index showed builder confidence rising to an 8-month high; however, builders continue to face supply-side constraints such as lot and labor shortages and ongoing building material price increases.


Nonetheless, demand for single-family housing is increasing at a consistent pace, driven by job and economic growth, rising homeownership rates and limited housing inventory. With these economic fundamentals in place, we should see continued upward movement of the single-family housing market as we close out 2017.

Two out of the three HMI components registered gains in November. The component gauging current sales conditions rose two points to 77 and the index measuring buyer traffic increased two points to 50. Meanwhile, the index charting sales expectations in the next six months dropped a single point to 77.

U.S. Building Permits rose by 5.9% in October to a seasonally adjusted annual rate of 1.297M – I had forecast a rise to 1.243M units.


Single family permits rose by 1.9% while multifamily permits were up by a substantial 13.9%.

Single-family permits, a reasonable indicator of future construction conditions, are running 10% higher on a year-to-date basis. Part of the gain for single-family construction in October was a rebound in Florida and Texas after project delays in September.

U.S. Housing Starts surged 13.7% month-over-month in October to a seasonally adjusted annual rate of 1.29M units – I had forecast an increase to 1.198M units.


Single-family starts increased for the month, rising to an 877,000 seasonally adjusted rate in October. This monthly annualized rate matches the post-recession high pace set in February of this year. However, the three month-moving average for single-family starts is at a post-recession high (860,000). Single-family starts are up more than 8% year-to-date compared to 2016 as limited existing inventory and solid builder confidence make for positive market conditions.

What to Watch for This Week

U.S. Existing Home Sales were up by 0.7% month-over-month in September to a seasonally adjusted annual rate of 5.39M units. I expect to see the October number be somewhat more robust with sales up to an annual rate of 5.42M units.

The final number for Consumer Sentiment in November will essentially remain at the early month figure of 97.8. My call is for it to rise by one tenth to 97.9.