Today, three economic updates shed light on the sustained moderate growth of the U.S. economy. The highlight reports include weekly jobless claims, the Chicago Fed National Activity Index, and Markit’s U.S. purchasing managers’ index (PMI) for manufacturing. Together, these statistics suggest a positive macroeconomic outlook, indicating that the deflationary pressures looming in Europe haven’t negatively impacted U.S. economic momentum.
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● U.S. Inflation Remains Tame | Wall St Journal
The consumer price index increased by 0.1%, likely providing the Federal Reserve with flexibility regarding interest rate hikes.
● Euro-Area Manufacturing Grows as Risk of Recession Eases | Bloomberg
A recent Purchasing Managers’ Index indicated unexpected growth in the region’s manufacturing sector this month, with Spain showing improved signs of recovery as third-quarter unemployment fell to its lowest since 2011. Germany’s factories have also rebounded from a slump in September.
● Oil Slump Leaves Russia Weaker Than Decaying Soviet Union | Telegraph
After the Cold War, Russia had the opportunity to develop a modern, diversified economy with support from the West—a chance that has now been squandered.
● Bond Funds Stock Up on Treasuries in Prep for Market Shock | Reuters
U.S. corporate bond funds have been acquiring Treasuries at more than double the pace of corporate debt amid fears that the struggling European economy and shifts in Federal Reserve policy might impact U.S. corporate profits.
● Ebola, GDP & Markets | Cumberland Advisors
It’s becoming evident that overcoming Ebola-related challenges is closely tied to the size of an economy, with poorer countries facing the most difficulties.
The three-month average of the Chicago Fed National Activity Index (CFNAI) is anticipated to show a slight decrease to +0.03 in the upcoming September update, as per The Capital Spectator’s median econometric point forecast. This prediction is marginally lower than August’s +0.07, which suggested above-average growth relative to historical trends. Values below -0.70 indicate an “increasing likelihood” of recession, according to guidelines from the Chicago Fed. Based on today’s estimation for September, the CFNAI’s three-month average is likely to remain at a level historically associated with marginally above-trend growth.
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We are witnessing a remarkable rebound in risky assets, which have made a significant U-turn in recent days. Where once there was turbulence, there is now strong upward momentum. While this upward trend could prove to be temporary, its current appearance is striking. Notably, U.S. real estate investment trusts (REITs) have experienced a robust revival. However, despite the overall uplifting market sentiment, commodities have shown significant divergence and are not joining the rise.
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● Existing Home Sales Hit Highest Level in 2014 | USA Today
Sales of existing homes last month reached their strongest level of the year, though they continued to remain below year-over-year levels for the eleventh consecutive month, as reported by the National Association of Realtors on Tuesday.
● U.S. Q3 Real GDP Still Looks Solid | First Trust
Following a robust 4.6% growth rate in Q2, we expect a 2.9% annual growth rate for Q3.
● U.S. Same-store Sales Eased 0.3% | IBD
Same-store sales saw a 0.3% decline in the week ending October 18, according to ICSC-Goldman, which has reduced the yearly growth rate to 2.1% from 3.8% the previous week.
● China Seen Staying Away from Rate Cuts | South China Morning Post
China’s central bank appears poised to avoid interest rate cuts despite growth slowing to a 25-year low, as political reforms influence monetary policy, according to sources involved in internal discussions.
● Ukraine’s Vote, Russia’s Fate | Project Syndicate
The upcoming elections in Ukraine on October 26 could not only determine the country’s future but also impact a significant portion of Europe.
The stock market volatility still raises some risk warnings, but the overall threat appears to be easing as indicated by a decline in extreme levels. For example, the VIX, which tracks the implied volatility of the S&P 500, fell below 20 for the first time since October 9. Although a brief dip in volatility could be mere noise following a recent surge in risk, the current decline instills a sense of optimism about the possibility of calmer market dynamics.
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● China’s Growth Slowest Since Global Crisis, Annual Target at Risk | Reuters
In the September quarter, China experienced its slowest growth since the global financial crisis, raising concerns about the world’s second-largest economy possibly hindering global growth and risking its official targets for the first time in 15 years.
● Analysts: VIX Back in Risk-Friendly Waters; S&P Nears 1,900 | MNI
The CBOE’s volatility index, or VIX, returned to sub-20 levels on Monday, as market participants eagerly await the potential for stability.
● Income Growth: The Taxman Cometh | Wells Fargo
Despite being five years into the recovery, income growth has been slow, with before-tax income growing only 1.5% from 2009 to 2013, and after-tax income declining by 7.2%.
● WTI Climbs Amid Estimates of U.S. Gasoline Supply Drop | Bloomberg
West Texas Intermediate crude has risen for three of the last four days as speculation grows that motor fuel inventories in the U.S., the world’s largest oil consumer, are diminishing. Brent also saw gains in London.
● EU to Mediate in Gas Dispute Between Ukraine and Russia | Deutsche Welle
The European Union is preparing to facilitate gas talks between Russia and Ukraine, aimed at securing payment agreements and preventing disruptions in gas supplies this winter.
Global economic concerns are once again affecting sentiment, yet recent data through September suggests few signs of stress within the U.S. macro trend. It remains to be seen whether this resilience will persist as we move through October. An initial indication will come on Thursday with the release of Markit’s business survey, which will provide early insights into manufacturing activity for the month. In the meantime, the previous months reveal a notable degree of positive momentum across a diverse set of 14 economic and financial indicators.
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● World Stocks Advance on Strong Data, Earnings | Reuters
Global equities rose on Monday, propelled by strong U.S. economic data and encouraging third-quarter earnings, alleviating concerns about the pace of global economic recovery and boosting interest in riskier assets.
● Volatility Unlikely to Alter Fed’s Policy Course | NY Times
The Federal Reserve remains attentive as financial markets exhibit volatility, but officials indicate that the anticipated trajectory of monetary policy is unlikely to change.
● Q3 Business Conditions Slowed, but Remained Solid; Growth Expected | NABE
Results from the October 2014 Business Conditions Survey by NABE indicate that growth persists among the majority of survey respondents’ organizations, with an increasing number reporting employment growth and less difficulty in filling vacancies.
● European Leaders Pivot to Debt Crisis After Wake-Up Call | Bloomberg
European leaders, jolted by the sudden reemergence of debt-crisis concerns, will meet in Brussels this week to restore investor confidence in the euro area.
● UK Economic Growth to Fall to 2.4% in 2015, Says EY Item Club | BBC
The EY Item Club forecasts that U.K. economy will grow by 2.4% in 2015, a notable decline from the expected 3.1% growth this year.
● Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance 
Summary via publisher (Yale University Press)
Vice is deeply ingrained in Western capitalism, as demonstrated by this captivating and often surprising history of modern finance. Ian Klaus’s work, “Forging Capitalism,” illustrates how 19th-century international financial matters were navigated not just by honorable gentlemen but also by an array of con artists, fraudsters, and risk-takers, all driven by the prospect of substantial monetary rewards. The combined effect of these grand deceptions and preventative measures has significantly shaped today’s financial institutions.
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Overall, these economic indicators suggest that while uncertainties linger globally, the U.S. economy is displaying resilience and maintaining its growth trajectory. As we look ahead, the data from the coming weeks will be crucial in determining whether this positive momentum can be sustained amidst external pressures.
