Comerica Economic Weekly

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This week’s economic data did little to dispel the fog of uncertainty that hangs over the U.S. economy and global financial markets. Existing home sales remain flat, dipping in September by 3.0 percent to a 4.91 million unit annual pace; within the range that we have seen all year. House prices show no signs of a breakout from the still-soft trend. The median sales price of an existing home is down 3.5 percent over the last 12 months. The September Leading Economic Index gained 0.2 percent, its fifth consecutive monthly increase. Current conditions cast doubt on the relevancy of the Leading Indicators for an economy that remains fundamentally challenged by constrained consumer spending, weak housing markets, and weak government spending. Overall prices were warmer in September, especially on the producer side as the PPI gained a hefty 0.8 percent and the CPI gained 0.3 percent for the month. The CPI was still under pressure from gasoline prices which fell before seasonal adjustment, but increased substantially after seasonal adjustment factors were applied. The CPI energy index increased by 2.0 percent for the month. Food prices are still creeping up, gaining 0.4 percent in September. Core CPI (all items less food and energy) was contained, increasing by only 0.1 percent in September. Over the last 12 months headline CPI is up 3.9 percent and core CPI is up 2.0 percent. The PPI for finished goods came in hotter than expected, up 0.8 percent in September, also boosted by fuel prices. Over the last 12 months the finished goods PPI is up 6.9 percent, keeping pressure on retailers who are getting squeezed between higher wholesale prices and tepid consumer demand. House starts for September jumped by 15 percent to a 658,000 unit annual pace. Total starts were boosted by an unsustainable surge in multifamily starts. Multifamily starts, normally a volatile series, were up by 53.4 percent for the month. Single-family starts were up by a more sedate 1.7 percent.  Another indication that total starts will settle in the near future comes from the permits data. Housing permits for September dropped by 5.0 percent to a 594,000 unit annual pace. Labor market indicators are still trending sideways. Initial claims for unemployment insurance decreased by 6,000 for the week ending October 15, but remain just above the benchmark level of 400,000, at 403,000.

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