We have had a spate of noisy data, beginning with the large downward revision of Q2 real GDP growth to 1.3 percent. Then we had a major decline in September’s unemployment rate to 7.8 percent. We also saw house starts and permits spike in September. UI claims have been all over the place. Orders for durable goods lurched as commercial aircraft orders hit some turbulence. Existing home sales for September gave back some of their strong August gains. There are no nefarious motivations behind the noisy data. Rather it represents a combination of calendar events and the imperfect mechanics of sampling economic data. Underlying these issues is the fact that we are living in a period of accelerated creative-destruction. The ever-changing nature of the economy puts data collection in catch-up mode, as statisticians struggle to keep pace with an increasingly complex economy. This is why it is vitally important to take a bundle of economic measures into account, rather than focus on one point and extrapolate from that single and imperfect observation. Existing home sales gave back some of their August gains, but overall housing metrics remain on an improving trend. House prices are increasing, though some of the recent strong gains are due to the declining portion of low-priced distressed homes on the market. The Conference Board’s Leading Economic Index for September increased by 0.6 percent, boosted by strong housing permits data and by gains in equity prices. Initial claims for unemployment insurance took a wild turn for the week ending October 13, spiking by 46,000 to hit 388,000. The overall sideways trend in UI claims is indicative of a labor market that has not fundamentally improved since August, when the unemployment rate was reported at 8.1 percent. Housing starts increased sharply by 15.0 percent for the month, hitting an 872,000 unit annual rate. The National Association of Home Builders reported that home builder confidence increased in October, for the sixth consecutive month and is now at the strongest level since June 2006. Retail sales for September increased by 1.1 percent, with a 1.3 percent gain in motor vehicles and parts. The September consumer price index gained 0.6 percent, boosted by the energy component which gained 4.5 percent. Industrial production for September gained a moderate 0.4 percent as manufacturing output increased by a modest 0.2 percent in August.
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