Many investors have dubbed the status of our US Economy as “Goldilocks”, not too hot and not too cold. But the most recent economic data has suggested that perhaps the porridge of economic growth in the U.S. is cooling. Retail Sales, excluding the volatile auto component, unexpectedly declined in September, and the August results were revised downward as well. Accounting for about 70% of economic activity, retail sales are an important indicator of economic activity. In addition, job openings declined, and the Philly Fed manufacturing index fell short of the consensus. Comments from the Fed did not improve the outlook. The Fed’s Beige Book reported that economic growth in recent weeks was “modest” and that wage gains were “mostly subdued.” Mortgage rates have drifted slightly downward on the news.
Inflation Makes a Rare Appearance
Slower growth should reduce inflationary pressures, but the September core consumer price index (CPI), which excludes food and energy, rose 1.9% for the year, up from 1.8% in August. This was the highest reading since July 2014. The inflation rate is a key factor in the Fed’s decision about raising the federal funds rate. Fed officials will be watching to see if higher CPI reading is the start of an upward trend.
Factors: The Economic Calendar is light this week. The highlight will be the housing sector data. The NAHB builder sentiment index will be released on Monday. Housing Starts will come out on Tuesday. Existing Home Sales will be released on Thursday.
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