MARKET WATCH: NOVEMBER 18, 2018

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Last Week’s Economic News

• Inflation, as measured by the Consumer Price Index, rose 0.4% in October. However, core prices (less food and energy) inched up 0.2%. After recent monthly declines, energy prices increased 2.7% last month, accounting for more than half of the increase in the overall CPI. Within the energy index, gasoline prices rose 3.7% in October. Food prices rose 0.2%. Over the last 12 months, the CPI has risen 1.8%. Over the same period, core prices are up 2.3%.

• Retail sales rose 0.3% in October and are up 3.1% since October 2018. Last month turned out to be a bounce back for retail sales, which fell 0.3% in September. In October, motor vehicle sales rose 0.5%, gasoline sales climbed 1.1%, and nonstore (online) sales surged 0.9%. On the downside, sales at clothing stores fell 1.0% and furniture store sales dropped 0.9%.

• Producer prices rose 0.4% in October after falling 0.3% in September. Prices are up 1.1% for the 12 months ended in October, the smallest increase since a comparable rise in the 12-month period ended October 2016. Prices for services rose 0.3% last month, boosted by a 0.8% advance in margins for trade services, which measure changes in margins received by wholesalers and retailers. The index for goods advanced 0.7% in October, the largest increase since a 1.0% jump in March. Seventy percent of the October rise in goods is attributable to prices for energy, which moved up 2.8%.

• Both import and export prices fell in October, further evidencing waning global inflation. Import prices dropped 0.5% while export prices dipped 0.1%. For the year, import prices are down 3.0% and export prices are off 2.2%. Driving import prices lower was a 3.7% drop in petroleum prices, which more than offset a 32.0% increase in natural gas prices. Fuel prices declined 13.7% over the past year. For exports, a 0.6% decline in prices of nonagricultural industrial supplies and materials offset a 1.9% increase in agricultural export prices.

• Manufacturing continues to lag in 2019. The Federal Reserve’s industrial production index fell 0.8% in October after dropping 0.3% in September. Manufacturing production decreased 0.6%, primarily due to a 7.1% drop in the output of motor vehicles and parts that resulted from a strike at a major auto manufacturer. The decreases for total industrial production, manufacturing, and motor vehicles and parts were their largest since May 2018, April 2019, and January 2019, respectively. Mining production decreased 0.7%, while utilities output fell 2.6%. Overall, total industrial production was 1.1% lower in October than it was a year earlier.

• The first month of the new fiscal year for the federal government saw October start off with a deficit of $134.5 billion, 34% higher than the $100.5 billion deficit the prior October. Government receipts totaled $245.5 billion, with $126.4 billion coming from individual income taxes and $6.6 billion received from corporate income taxes. The federal government spent $380.0 billion in October, with Social Security ($89.0 billion), National Defense ($71.0 billion), and Medicare ($56.0 billion) accounting for most of the expenditures, as usual.

• For the week ended November 9, there were 225,000 claims for unemployment insurance, an increase of 14,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended November 2. The advance number of those receiving unemployment insurance benefits during the week ended November 2 was 1,683,000, a decrease of 10,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

This week the focus is on the continuing trade negotiations between the United States and China — clearly a market mover. Also, economic reports center on the housing sector, with October housing starts figures as well as the latest on existing home sales.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

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