We forecast weaker October retail sales, with both top-line sales and sales excluding autos declining 0.1%. Motor vehicle sales came in weaker at a 15.2 million unit annual rate in October, down just slightly from September. Weaker auto sales should subtract from the top-line figure. At the same time, gasoline prices were much lower in October at an average of USD3.34 per gallon for the month, down 5.3% from the month before. We anticipate this will drag down nominal receipts in the retail sales report. The bulk of the decline in our forecast is due to these nominal factors – though in real terms, the decline in gas prices will boost real consumer incomes which could be a positive factor for spending moving into the important holiday shopping season.
We forecast the top-line October CPI fell 0.1%, while the core CPI likely posted a 0.1% increase. While seasonal factors will offset some of the impact, the 5.3% decline in retail gasoline prices during the month will drag down the energy index, and will be responsible for the majority of the top-line decline. Agricultural prices have been soft over the past few months suggesting that the food index will show that consumer food prices remained stable during the month. We look for the core CPI to post another trend-like 0.1% gain.
Existing home sales likely declined 2.6% to a 5.15 million unit annual rate in October. Pending home sales, contracts that typically become completed sales in one to two months, have declined over the past two months. There was a steep 5.6% decline in pending home sales September, following a 1.7% decline in August. Commentary from the National Association of Realtors in the September existing home sales report suggested declines in the coming months and a moderation in the sales pace may be expected as housing affordability falls alongside rising mortgage interest rates.
The FOMC minutes will be parsed for hints on the timing of an expected taper early next year. After leaving policy unchanged last month, the FOMC minutes may offer insights into any changes in the FOMC’s assessment of the economy. Many economic data releases were interrupted between the September and October FOMC meetings as a result of the government shutdown, so the minutes may give some insight into whether the Committee looks for meaningful shutdown-related impacts in upcoming data.
We will look closely at the minutes for any discussions on potential changes to forward guidance. In particular, we look for any possibility that the FOMC may adjust the threshold levels in their Fed funds rate guidance as an additional policy tool. We heard from FOMC members recently on this subject, Federal Reserve Bank of Atlanta President Lockhart mentioned that he might consider dropping the unemployment threshold below 6.5%, perhaps in conjunction with the start of the taper. The minutes may provide additional details of the range of views on the Committee regarding this subject, and any deliberations that took place at the last meeting.
In the October FOMC statement, there were some small changes to the committee’s description of economic developments. While growth continued to expand at a “moderate pace,” the recovery in the housing sector “slowed somewhat in recent months.” That compares with the September statement text that the “housing sector has been strengthening, but mortgage rates have risen further.” In a similar vein, the September statement reference to the “tightening of financial conditions observed in recent months” was dropped, reflecting the pullback in rates. The October minutes may shed some light on FOMC views and expectations for the housing market, and how the Fed viewed financial developments in between the September and October meetings that led them to drop the statement reference to the “tightening of financial conditions” in the October statement.
The top-line PPI likely fell 0.3% in October, while the core remained muted with a 0.1% rise. The lower residential gasoline prices in October will also weigh on the energy index in the PPI, and this is the cause of most of the top-line decline in our forecast. Food prices were down 1.0% in the PPI last month, another decline is not expected, but agricultural prices have remained soft so we do not look for an offsetting increase in the food index this month. Price pressures in the core should also be limited in line with recent trends.
The October Philadelphia Fed Business Outlook Survey likely rose to 21.0 from 22.3. A strong new orders index last month (27.5, up from 21.2 in September) suggests good momentum for activity in November. As energy prices continue to decline, lower prices paid or prices received indexes could be a source of downside risk to our forecast if they drag down the top-line. We expect, however, that the general activity indexes and employment related indexes should suggest continued moderate expansion in the Philadelphia Fed District
We forecast the top-line October CPI fell 0.1%, while the core CPI likely posted a 0.1% increase. While seasonal factors will offset some of the impact, the 5.3% decline in retail gasoline prices during the month will drag down the energy index, and will be responsible for the majority of the top-line decline. Agricultural prices have been soft over the past few months suggesting that the food index will show that consumer food prices remained stable during the month. We look for the core CPI to post another trend-like 0.1% gain.
Existing home sales likely declined 2.6% to a 5.15 million unit annual rate in October. Pending home sales, contracts that typically become completed sales in one to two months, have declined over the past two months. There was a steep 5.6% decline in pending home sales September, following a 1.7% decline in August. Commentary from the National Association of Realtors in the September existing home sales report suggested declines in the coming months and a moderation in the sales pace may be expected as housing affordability falls alongside rising mortgage interest rates.
The FOMC minutes will be parsed for hints on the timing of an expected taper early next year. After leaving policy unchanged last month, the FOMC minutes may offer insights into any changes in the FOMC’s assessment of the economy. Many economic data releases were interrupted between the September and October FOMC meetings as a result of the government shutdown, so the minutes may give some insight into whether the Committee looks for meaningful shutdown-related impacts in upcoming data.
We will look closely at the minutes for any discussions on potential changes to forward guidance. In particular, we look for any possibility that the FOMC may adjust the threshold levels in their Fed funds rate guidance as an additional policy tool. We heard from FOMC members recently on this subject, Federal Reserve Bank of Atlanta President Lockhart mentioned that he might consider dropping the unemployment threshold below 6.5%, perhaps in conjunction with the start of the taper. The minutes may provide additional details of the range of views on the Committee regarding this subject, and any deliberations that took place at the last meeting.
In the October FOMC statement, there were some small changes to the committee’s description of economic developments. While growth continued to expand at a “moderate pace,” the recovery in the housing sector “slowed somewhat in recent months.” That compares with the September statement text that the “housing sector has been strengthening, but mortgage rates have risen further.” In a similar vein, the September statement reference to the “tightening of financial conditions observed in recent months” was dropped, reflecting the pullback in rates. The October minutes may shed some light on FOMC views and expectations for the housing market, and how the Fed viewed financial developments in between the September and October meetings that led them to drop the statement reference to the “tightening of financial conditions” in the October statement.
The top-line PPI likely fell 0.3% in October, while the core remained muted with a 0.1% rise. The lower residential gasoline prices in October will also weigh on the energy index in the PPI, and this is the cause of most of the top-line decline in our forecast. Food prices were down 1.0% in the PPI last month, another decline is not expected, but agricultural prices have remained soft so we do not look for an offsetting increase in the food index this month. Price pressures in the core should also be limited in line with recent trends.
The October Philadelphia Fed Business Outlook Survey likely rose to 21.0 from 22.3. A strong new orders index last month (27.5, up from 21.2 in September) suggests good momentum for activity in November. As energy prices continue to decline, lower prices paid or prices received indexes could be a source of downside risk to our forecast if they drag down the top-line. We expect, however, that the general activity indexes and employment related indexes should suggest continued moderate expansion in the Philadelphia Fed District
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