The first was retail sales for October, which showed an increase of 0.1 percent—well below expectations of a 0.3-percent gain and at the lower end of the range. The prior month was also revised down, from 0.1-percent growth to flat. This was a disappointing number, although much of the shortfall was due to a decline in gasoline sales, and the more detailed numbers were more encouraging. Retail sales excluding auto and gas, for example, rose from flat in September to a 0.3-percent increase, although even that number was below the expected growth rate of 0.4 percent. Overall, these reports were mildly disappointing—nothing to worry about, but certainly not encouraging.
The other major release was the University of Michigan Consumer Confidence survey, which rose from 90.0 to 93.1, significantly better than the expectation of 91.5. This was a pleasant surprise and suggests the slowdown in retail sales growth may be temporary. Expectations rose by 3.5 and current conditions rose 2.5, suggesting that consumers expect conditions to continue improving.
Consumer prices. On Tuesday, the Consumer Price Index figures will be released. For the headline inflation rate, the monthly figure is expected to move back into positive territory, to 0.2 percent from –0.2 percent, bringing the annual rate up to 0.1 percent from flat over the previous year. For core inflation, which excludes energy and food, the monthly rate is expected to remain constant, at 0.2 percent, with the annual rate for the past 12 months moving up slightly from 1.9 percent to 2.0 percent. Under the hood, gasoline prices have started to increase, along with housing costs, which should continue to push inflation higher, giving the Fed more support for any possible rate increases.
Industrial production. These numbers will also be released on Tuesday. As noted in earlier reports, there have been signs of stabilization in the industrial sector, and these figures are consistent with that stabilization. Growth in industrial production is expected to be 0.3 percent, up from flat the previous month, while manufacturing growth is expected to rise from 0.1 percent to 0.2 percent. The wild card here is the energy sector. Depending on the degree of further contraction, the industrial number may be more modest than expected. Even if that’s the case, however, expectations are that these sectors are stabilizing after a series of declines, which is positive.
Housing. On Tuesday, the monthly survey of members of the National Association of Home Builders will be released (the NAHB Index) and is expected to remain at the record-high level of 64 from last month. Housing starts will be released on Wednesday and are expected to drop very slightly from the previous month, to 1.2 million. This industry and sector have been performing quite strongly, and these numbers would signal that that is continuing.
Federal Open Market Committee (FOMC). Finally, the minutes of the October meeting of the FOMC will be released on Friday. These will be interesting primarily in what they show of the Fed’s willingness to consider a December rate increase. Although the strong October jobs report is considered to have increased the odds of that increase, what the Fed was actually thinking before that report will add valuable perspective. The only real market risk from this report is if it proves significantly more cautious than expected. But based on what we know so far, that seems unlikely.
Have a great week!