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Week In Review – October 12, 2018

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Week In Review

Volume 23, Number 36

Reginald J. Smith, Community Development Manager – Bank of Kansas CityReginald J. Smith

Economic Highlights for Week Ending October 12, 2018

 

MONDAY, October 8th

COLUMBUS DAY
Bond Market Closed

 

TUESDAY, October 9th

The National Federation of Independent Business’ small business optimism index fell from 108.8 in August to 107.9 in September, but remains at the third highest level in the survey’s 45-year history.  The decline was a result of fewer firms indicating plans to increase inventories and employment and make capital outlays.  Earnings trends were also given lower ratings last month while expectations the economy will improve slipped.  More firms increased investment spending and indicated they have expectations for higher retail sales and better credit conditions.  Many firms reported job openings they could not fill and raised compensation as a result.

Inflation remained subdued and fewer business owners raised average selling prices.  All told, the small business survey remains at a very high level and shows business owners expanding their businesses at a pace not seen in decades in the last two years; the outlook is for further growth ahead which will make a significant contribution to third quarter economic growth.

 

WEDNESDAY, October 10th

Inflation at the wholesale level firmed somewhat in September but does not point to quick-building inflationary pressures allowing the Fed to continue raising interest rates once per quarter this year and next. Headline producer prices rose 0.2% last month and are now up 2.6% on the year.  Excluding food and energy costs, core producer prices also rose 0.2% on the month and are up 2.5% on the year. Outside of the isolated pressure for transportation and shipping in this report, input costs remained subdued.

Equities sold off sharply today amid investors’ concerns about rising interest rates impacting continued economic growth.  The Dow tumbled 3.2% to 25,598 as the NASDAQ was down an even steeper 4.1% to 7422. Treasury yields held steady until late in the session and then only moved a couple of basis points lower to 3.19% for the 10-year note.

 

UFSC Week In Review

THURSDAY, October 11th

Jobless claims rose 7k to 214k for the week ending October 6.  The four-week moving average gained 2500 to 209,500 which is still exceptionally low.  Hurricane Florence had very little impact on the labor market in September.  Hurricane Michael which hit Florida this past week is certain to affect initial claims data next week.  The impact on the October employment report remains to be seen.

The consumer price index increased 0.1% in September as energy prices fell 0.5% and food prices were unchanged.  Excluding food and energy prices from the index, core consumer prices rose just 0.1% on the month.  Over the past year, the CPI was down 0.1% to 2.3% in September and the core CPI was at 2.2%.  Consumer inflation remains subdued.  Below consensus inflation measures in this report will keep the Fed on its current rate hike path.

 

FRIDAY, October 12th

Import prices rose 0.5% in September led by a 4.1% increase in imported petroleum prices.  Excluding petroleum, import prices come in unchanged on the month and up just 0.6% on the year.  Export prices were unchanged on the month and up 2.7% on the year; agricultural export prices however, were down 2.3% on the year.

The University of Michigan’s consumer sentiment survey fell to 99.0 in its early October reading from a level of 100.1 in September.  Consumers were more cautious about their current household incomes compared to a year ago, which lowered the current conditions component by 0.8 points while the expectations component fell 1.4 points as their assessments of household finances and business prospects moderated.  Still the level of the index does suggest solid consumer sentiment heading into the holiday shopping season.  The final reading on October consumer sentiment will be released in two weeks.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
25,339.99
26,447.05
-1107.06 or -4.18%


NASDAQ
7,496.89
7,788.45
-291.56 or -3.74%


WEEK IN ADVANCE

After a week of mostly housing market related data, reports in the coming week wrap up the sector for the month. Watch for new home sales and pending home sales, both on next week’s calendar.


Key Interest Rates

Latest

6 Mos Ago

1 Yr Ago



Prime Rate
5.25%
4.75%
4.25%


Fed Discount
2.75%
2.25%
1.75%


Fed Funds
2.18%
1.69%
1.16%


11th District COF
1.015%
0.816%
0.732%


10-Year Note
3.16%
2.80%
2.33%


30-Year Treasury Bond
3.33%
3.02%
2.86%


30 -Yr Fixed (FHLMC)
4.90%
4.42%
3.91%


15 -Yr Fixed (FHLMC)
4.29%
3.87%
3.21%

6-Mo Libor (FNMA)
2.60388%
2.45240%
1.50600%

 

Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

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