Last Weeks Economic News In Review

Dated: 10/19/2016

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Retail sales enjoyed decent growth, while layoffs continued to hit historic lows and producer prices increased more than expected.

Retail Sales

Retail sales were in line with market projections, growing 0.6 percent in September to hit $459.8 billion for the month, the Census Bureau reported last week. Gains in the automotive market was a big contributor to September’s growth, with sales of motor vehicles and parts increasing 1.1 percent and gasoline stations seeing a 2.4 percent increase.

Additionally, there were other various strong segments across the retail spectrum: furniture and home furnishing were up 1 percent; building material and garden supply stores gained 1.4 percent; sporting good, hobby, book and music stores grew 1.4 percent; and miscellaneous retailers grew 1.8 percent.

The retail numbers, mixed with other indicators, led many economists to conclude that rates would likely increase by the end of the year. While some stated that position more strongly than others, TD Securities Economist Brittany Baumann took a measured tone.

“Overall, the details of the report are more positive than what the modest print on core sales suggests,” Baumann told Reuters. “Together with healthy levels of consumer sentiment and continued improvement in labor market conditions, today's report is enough to keep a December Fed rate hike firmly on the table.”

Producer Price Index

The Producer Price Index for final demand goods rose 0.3 percent in September after seeing no change in August, the Bureau of Labor Statistics reported last week. This was ahead of the market expectation for a 0.2 percent gain, and overall, the index is up 0.7 percent from the same period a year ago, which marks the largest annual rise since December 2014.

Final demand goods are the wholesale goods that are sold to retailers, who ultimately sell those goods to customers. Prices for final demand goods are important to track, because they indicate where consumer prices, and thusly inflation, are headed. That information is important to the housing market, because the Fed typically increases interest rates as a response to increased inflation.

In September’s case, the gains were “consistent with the notion that price pressures are beginning to accumulate and suggest that the consumer-price readings may continue to be firm going forward,” Amherst Pierpont Securities Economist Stephen Stanley told the Wall Street Journal.

Initial Jobless Claims

Layoffs fell to their lowest point in more than 40 years. First-time claims filed by the newly unemployed during the week ending October 8 were down to 246,000 claims, according to last week’s report from the Employment and Training Administration.

That total was well below the 255,000 claims the market had expected, and made it the 84th straight week that claims have been below 300,000 claims, a threshold that economists generally consider an indicator that the job market is growing. Layoffs haven’t seen that long of a streak of initial claims staying below 300,000 since 1970.

The four-week moving average — considered a more stable measure of layoffs — dropped 3,500 claims from the previous week’s average to 249,250 claims. The economy hasn’t seen the average reach that low since November 3, 1973, when claims dipped to 244,000.

This week we can expect:

  • Monday — September industrial production and capacity utilization from the Federal Reserve.

  • Tuesday — September consumer price index for September from the Bureau of Labor Statistics.

  • Wednesday — September housing starts and building permits from the Census Bureau.

  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; September leading economic indicators from The Conference Board; existing home sales for September from the National Association of Realtors.

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Don Fleming

Don Fleming has been practicing real estate for more than 10 years , with the primary goal to become a trusted advisor for his clients. He specializes in new construction, where he leverages his exten....

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