Thursday economics roundup: Solid footing, soft landings

Reuters

Thursday economics roundup: Solid footing, soft landings

Oct 17, 2024 at 3:40 pm GMT

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Main U.S. stock indexes modestly green

Tech leads S&P sector gainers; Real Estate down the most

Euro STOXX 600 index up ~0.8%; ECB cuts rates 25 bps

Dollar, gold, crude gain; bitcoin dips

U.S. 10-Year Treasury yield jumps to ~4.09%

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THURSDAY ECONOMICS ROUNDUP: SOLID FOOTING, SOFT LANDINGS

Investors were buried under an avalanche of mostly solid data on Thursday, all of which adds up to a soft landing and slower, smaller rate cuts from the Fed.

Receipts at U.S. retailers USRSL=ECI increased by 0.4% in September, accelerating nicely from August's meager 0.1% gain a and beating the 0.3% increase analysts expected.

Delving deeper into the Commerce Department's report, a 1.6% decline in gasoline station receipts was offset by 1.0% increases for food/beverages, groceries, and food/drink services. Non-store retailers, which includes e-commerce, rose by 0.4%.

"Retail sales continue to defy the weak economy thesis," writes Quincy Krosby, chief global strategist at LPL Financial. "The implications for monetary policy center on whether the Fed worries that the renewed strength in the economy fuels an uptick in inflation, although expectations remain that there will be a 25 basis point cut at the next meeting, particularly if the hurricane damage severely impacts the labor market."

A nice upside surprise came courtesy of so-called core retail sales, which excludes gasoline, autos, building materials and food services - and is closely related to the consumer spending element of GDP. The metric jumped 0.7%, a healthy improvement over the prior month's 0.3% - a figure economists expected to be repeated this month.

Next, last week, 241,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, 7.3% fewer than the previous week and 19,000 shy of the consensus estimate.

Ongoing claims USJOBN=ECI, reported on a one-week delay, increased by 0.5% to 1.867 million, still soaring well above the 1.7 million pre-pandemic normal, suggesting that it's taking laid off workers longer to find a suitable replacement gig.

Warning that claims could surge next week in the wake of Hurricane Milton, Carl Weinberg at High Frequency Economics says "storm-generated job losses will persist for a while."

But "there is no sign of incipient recession in these figures," Weinberg adds. "The labor market is softening but not imploding as you would expect in a recession."

Moving on to factory data, industrial output USIP=ECI shrank by 0.3% last month, a bit steeper than the 0.2% drop forecast by economists.

Capacity utilization USCAPU=ECI, viewed as a barometer of U.S. economic slack, unexpectedly dipped to 77.5% from 77.8%.

"Manufacturing will see rebound when the Boeing strike ends," says Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. "Renewed declines in long-term interest rates would help the sector, but probably only at the margin, especially if they are accompanied by a material weakening in consumers’ demand, as we expect."

Separately, the Philadelphia Federal Reserve's business index (or, the Philly Fed) report USPFDB=ECI delivered a current month reading of 10.3, far more robust than September's 1.7 and well to the north of the 3.0 predicted by Wall Street.

Taken together with Tuesday's Empire State reading, it provides a mixed picture of Atlantic region manufacturing.

A positive Philly Fed/Empire State reading indicates expanding factory activity; a negative print signifies contraction.

And finally, the mood among U.S. homebuilders has grown a tad less gloomy this month, according to the National Association of Home Builders (NAHB).

The NAHB's Housing Market index USNAHB=ECI delivered a reading of 43, a two-point improvement over September and a hair better than analysts expected.

Even so, the index remains well below the level of 50, the dividing line between pessimism and optimism in the sector.

"Many prospective home buyers remain on the sideline waiting for lower interest rates," says Robert Dietz, NAHB's chief economist. "We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans."

(Stephen Culp)

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FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:

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BIOTECH INVESTORS STAY ON SIDELINES AS US ELECTION LOOMS - CLICK HERE

BROADER MARKET SPREADS ITS WINGS - CLICK HERE

BIG OIL CASH RETURN RESILIENCE IN SPOTLIGHT FOR 2025 - BOFA - CLICK HERE

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SOVEREIGN DEBT DEFAULT LIST HAS SHRUNK THIS YEAR - TELLIMER - CLICK HERE

EARNINGS LIFT THE STOXX, BANKS BUOYANT - CLICK HERE

EUROPE BEFORE THE BELL: TSMC BOOST, NESTLE MISS - CLICK HERE

ECB TO CUT, MARKETS WANT CLUES ON NEXT MOVE CLICK HERE