What I Saw Last Week

Inflation, as measured by the Consumer Price Index, rose by 0.1% with the core rate also up by 0.1% (I had forecast both to have risen by 0.2%).

CPI

The monthly increases left total CPI up by 2.3% year-over-year, versus 2.7% in August, and the core rate up by 2.2%, unchanged from August.

The takeaway from the report is that it helped temper concerns about rising inflation for the time being yet, with total CPI and core CPI both running above the Fed’s long-run inflation target of 2.0%, it still leaves little reason to think the Fed is going to back away from a rate hike in December.

The preliminary Consumer Sentiment number for early October came in at 99.0 from the final September figure of 100.8 – I had forecast a more modest drop to 100.0.

CS

Of note is that there was hardly any overlap in the time interviews for the survey were conducted and the recent sell-off in the stock market, suggesting that the impact of the sharp stock market pullback could register more noticeably in the final reading for October.

The takeaway from the report is that it revealed some budding concerns about inflation crimping real income expectations, which is something to be watched closely considering spending is driven more by income growth than consumer confidence.

What to Watch for This Week

U.S. Retail Sales in August were generally a disappointment with total sales rising by just 1% but core sales rose by 0.3%.  I expect to see significant improvement in the September number that should show total sales rising by 0.6% and core sales (ex-autos) up by 0.4%.

The NAHB Housing Market Index has been steady at 67 for the past two months and I am looking for the October number to stay at the September level.

August Housing Starts rose by 9.2% month over month to a seasonally adjusted annual rate of 1.282 million units. I expect to see that figure pull back to 1.221 million.

U.S. Building Permits dropped 5.7% in August to a seasonally adjusted annual rate of 1.229 million units.  Look for the September number to rise to 1.273 million.

U.S. Existing Home Sales in August were unchanged at a seasonally adjusted annual rate of 5.34 million units. I believe that the September number will show a modest pull back to an annual rate of 5.30 million units.

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