Week of October 8 - 12, 2018

Maureen Kelliher, CFA

Maureen Kelliher, CFA

October 17, 2018

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (Oct 6) 207k est., 214k actual, 207k prior

Continuing Claims (Sep 29) 1660k est., 1660k actual, 1656k prior

NFIB Small Business Optimism (Sep) 108.3 est., 107.9 actual, 108.8 prior

Producer Price Index Ex Food & Energy YoY (Sep) 2.5% est., 2.5% actual, 2.3% prior

Headline PPI YoY (Sep) 2.7% est., 2.6% actual, 2.8% prior

Consumer Price Index Ex Food & Energy YoY (Sep) 2.3% est., 2.2% actual, 2.2% prior

Headline CPI YoY (Sep) 2.4% est., 2.3% actual, 2.7% prior

Real Average Hourly Earnings YoY (Sep) 0.5% actual, 0.2% prior

Import Price Index YoY (Sep) 3.1% est., 3.5% actual, 3.8% prior: R+

Export Price Index YoY (Sep) 2.9% est., 2.7% actual, 3.5% prior: R-

University of Michigan Sentiment Index (Oct P) 100.5 est., 99.0 actual, 100.1 actual

Empire Manufacturing (Oct) 20.0 est., 21.1 actual, 19.0 prior

Retail Sales Ex Auto & Gas (Sep) 0.3% est., 0.0% actual, 0.1% prior: R-

Retail Sales Control Group (Sep) 0.5% est., 0.5% actual, 0.7% prior: R+

 Strong or Improving

 Inconclusive or lacking trend

 Weak or declining

R+ Revised up

R- Revised down

For the year thus far, the overall U.S. economy has been strong, but recent economic releases have been more mixed. The housing market has showed signs of slowing, September’s payroll employment gains missed estimates, wage growth has yet to accelerate and retail sales over the last several months softened. On the other hand, economic gauges such as consumer confidence and small business sentiment remain historically high (although off their peaks) and weekly jobless claims and unemployment are at multi-decade lows. Thus, although U.S. growth likely remained elevated during the third quarter, at least for the moment, the outlook for fourth-quarter growth suggests some moderation.

Capital markets retreated sharply last week, as a combination of factors led to a 5% sell-off. Some of the factors weighing on investors included fears the Federal Reserve would hike rates too aggressively, a slowdown in China, overheating U.S. economy and the negative effectives of tariffs on corporate earnings. For the week, the Dow Jones Industrial Average slumped -4.2% and the S&P 500 Index sank -5.0%. No sector was spared the carnage but, as institutional investors swapped their high-flying tech stocks for safer bets, technology and cyclical stocks were hit the hardest. Remarkably, foreign markets performed relatively well last week, as the MSCI EAFE Index dropped -3.9% but emerging markets fell just - 2.0%. Although the yield on the 10-year Treasury note declined from 3.2% to 3.1% last week, bonds were mixed as some fixed income sectors rebounded more than others. For the week, the Barclays U.S. Aggregate Bond Index and U.S. corporate bonds gained 0.4% while 10-year municipal bonds and high yield bonds fell -0.2% and -0.5%, respectively.