Pre-Thanksgiving Economic Update

It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week–I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines:

Consumer Price Index (CPI) Increases

The Labor Department reported that its Consumer Price Index (CPI) increased 0.2% in October. Core CPI, which doesn’t include food and energy costs, also rose 0.2% last month. An increase in medical cost and rents attributed to the overall increase in CPI in October. In the past 12 months, CPI has increased 0.02%, while core CPI is up 1.9%. The increase in CPI in October came after two-consecutive months of declines, and could further support the Fed’s move to raise key interest rates in December.

Industrial Production Slips

In October, industrial production slipped 0.2% month-over-month. This missed economists’ expectations for flat industrial production last month. Capacity utilization dropped to 77.5%, down from 77.7% in September, in line with expectations. Low crude oil prices and a drop in utilities due to warmer-than-usual weather weighed on industrial production last month. However, manufacturing output increased 0.4% in October, which was a welcome development after September’s 0.1% dip.

Housing Starts Plunge; Building Permits Increase

In October, housing starts plunged 11% month-over-month to a seasonally adjusted annual rate of $1.06 million. Single-family home starts drove the decline, falling 2.4% last month, while construction on apartments and condos plummeted 25.1%. At the same time, building permits increased 4.1% in October to a seasonally adjusted annual rate of 1.15 million. Labor shortages and firming home prices weighed on the housing industry last month, as home construction and sales slowed down. However, the housing market is still showing signs of improvement, as housing starts have been about 1.12 million in the past three months, up from 1 million in the same three-month period in 2014.

Initial Claims for Unemployment Drop

For the week ending November 14, initial claims for unemployment dropped 5,000 to 271,000, which was in line with economists’ expectations. The four-week moving average increased by 3,000 to 270,750. The labor market remains resilient, with 37-straight weeks below the 300,000 threshold and unemployment claims now near a 42-year low. So all eyes are on the December payroll number, which is expected to increase by 200,000 this month.

Index of Leading Economic Indicators Increases

In October, the index of leading economic indicators increased 0.6% after declining 0.2% in September. This was in line with economists’ expectations. An increase in building permits and stock prices supported the October rebound. The sharp increase in leading economic indicators last month suggests the U.S. economy is improving at a more moderate pace.

Have a great weekend,

Louis Navellier

Louis Navellier

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