Generally positive news coming into the week of October 23:
1 – Retails Sales Show Ongoing Strength
Retail sales continued their upward trend, with a 0.71% monthly increase. From a year-over-year-perspective, retail sales have shown regular gains since bottoming out in May through July. The gains were fairly broad-based.
The ongoing strength in retails sales will be a positive indicator for GDP growth. Consumers remain resilient despite high inflation.
2 – However, Housing Market Slowdown Continues
However, existing home sales declined to 3.96 million units sold, and the median price also fell. The months’ supply of homes crept up to 3.4 years, which is still considered a tight supply historically.
With mortgage rates at high levels, many homeowners have little incentive to sell, as replacing their home would be much more expensive. Buyers have turned to new homes to help fill the gap, as reflected in the rebound in housing starts from last month’s recent low (also showing solid month-over-month growth).
3 – Manufacturing and Employment Show Signs of Turnaround
On the production side, both industrial production and manufacturing capacity utilization are showing monthly gains.
With the monthly gains in industrial output, we are seeing a reversal of the contraction that occurred earlier in the year. This aligns with the slight improvement seen in the ISM Manufacturing index earlier this month, though activity is still declining overall.
Additionally, initial claims for unemployment insurance continued their downward trajectory.
Fed Rate Hike Still Likely But Growth Concerns Remain
As the Federal Reserve attempts to engineer an economic slowdown to fight inflation, the general improvement across economic indicators could lead them to raise interest rates again at their next meeting. One key indicator they monitor is the monthly jobs report, so the decrease in unemployment claims points to a potentially strong jobs number in the coming weeks.
Looking ahead into this final full week of October, we will get data on new home sales, inflation, and the initial GDP growth estimate for the last quarter, which will provide more insight into the Fed’s likely direction at their next meeting.
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