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
According to Wednesday’s report from the Labor Department, the Consumer Price Index (CPI) rose 0.1% in October, in line with economists’ expectations. In the past 12 months, the CPI has increased 2.0%, also in line with economists’ expectations. Core CPI, which excludes food and energy costs, moved 0.2% higher in October, and is up 1.8% for the past 12 months. While core CPI is on the softer side, the Federal Reserve may find its year-over-year pickup positive, particularly as it relates to their target of 2% inflation.
Looking deeper, gasoline prices fell 2.4% after jumping 13.1% in September, which was the largest gain since June 2009. Subtle signs of an underlying pickup in inflation can be seen in used car prices, which rose 0.7%, as well as in hospital services and rent costs, which increased 0.5% and 0.3%, respectively. Overall, October’s prices were marginally higher than September, providing further support to expectations that the Fed will raise key interest rates rate one more time this year, in the December Federal Open Market Committee (FOMC) meeting.
Retail sales rose 0.2% in October, bolstered by strong motor vehicle sales and other goods. Economists were expecting the Commerce Department’s report to be unchanged from September, where retail sales climbed 1.9%. However, the massive effort to obtain materials and rebuild after the hurricanes has likely slackened a bit, leading to a deceleration in retail sales momentum. Gas sales decreased 1.2% after surging 6.4% in September. Now, Americans are still spending money, just not in the same places. Both clothing and restaurant sales increased 0.8%. Interestingly, sales at sporting goods, hobby, book and music stores jumped 1.5% in October, after a soft 0.1% rise in September.
According to the Commerce Department, U.S. business inventories were unchanged in September. Inventory levels are estimated to total $1,888.7, virtually unchanged from the $1,888.0 reading in August. Economists were expecting inventories, which rose 0.6% in August, to grow 0.2% in September. Retail inventories, which exclude autos, fell 0.9%, a slight moderation from the 1.0% drop in August. Business sales surged 1.4%, signaling the possibility that companies may need to order more goods to meet demand in the coming months. At September’s sales pace, it would take 1.36 months to empty the shelves, slightly lower than the 1.38 months in August.
On Thursday, the Federal Reserve reported that industrial production jumped 0.9% in October, topping economists’ estimates for a 0.5% increase and making its second consecutive month of gains. Manufacturing output rose 1.3%, but mining fell 1.3% last month. Capacity utilization—which helps us understand how much slack may be in the economy—rose 77.0%, up from 76.4% in September. Utilities output was up 2.0%, making for an overall healthy report. Factory activity continues to recover after Hurricanes Harvey and Irma.
That’s all I have for you this week. I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,