Thanks to Dent Research, provided here is our weekly information roundup ending the week of October 13, 2017. We start each subject with what you hear in the news and finish with what that information means to you. We hope this information will help you separate the noise from the news.
Retail Sales Up 1.6% in September... Vehicle sales ticked up 3.6% and gasoline rose 5.8%.
What it means – It’s still about Hurricane Harvey. Consumers need to replace hundreds of the thousands of damaged cars. I expect this
replacement wave to run at least through the end of the year.
Sales at building materials merchants, think Home Depot and Lowe’s, jumped 2.1% last month. My local Home Depot can’t keep up with the drywall demand. Like auto makers, material suppliers should enjoy boost over the next few months.
Federal Reserve Bankers Plan to Raise Rates in December... According to the minutes from the September meeting, the bankers generally agreed to raise rates by the end of the year.
What it means – The Fed members discussed low inflation and that they will closely watch price indicators over the next couple of months, but that’s going to be quite a job.
Hurricane Harvey sent energy prices higher, and I expect increased consumption this quarter as those affected by the storms replace damaged goods and flooded cars and renovate their homes. But those effects should subside by the first quarter.
If the Fed raises rates based on current data, it risks making an obvious mistake. Given how many times the Fed Governors have discussed raising rates lately, it seems like a foregone conclusion no matter what happens with the data.
Consumer Price Index (CPI) Rose 0.5% in September... A 6.1% rise in energy helped pushed consumer prices to their highest monthly gain in eight months.
What it means – The rise in energy and gasoline (13.1%) reflects the refinery disruptions caused by Hurricane Harvey. Without that spike, prices remain sluggish. Core CPI, which removes food and energy, rose just 0.1% last month. Medical care, clothing, and car prices fell.
Like the jobs report last week, the hurricanes have thrown another report out of whack. The Fed seems intent on raising rates, so I don’t expect this report to change their mind.
Media Leaks Suggest the ECB Could Cut Bond Purchases in Half, End Program in September... The ECB currently buys 60 billion euros per month of government bonds.
What it means – Well, they were bound to end their program at some point. The problem is, no one knows exactly what will happen. As the world’s central banks printed money together, global GDP grew at a tepid pace.
When the Fed starts shrinking its balance sheet and the ECB stops buying bonds, on net central banks will take money out of the global system. What could possibly go wrong?
Catalan Governor Declares Independence, Then Suspends It... The governor said he wanted to wait several weeks so that he could negotiate with the federal government.
What it means – Spanish Prime Minister Rajoy is upset. The irony of democracies and republics is that everyone is free, unless of course you no longer want to be ruled by the national government. Then you’re an enemy of the state.
The Catalonian vote broke Spanish law, as does its declaration of independence. Rajoy has asked the Catalonian government to clarify its stance. Is the region a loyal part of Spain, or do they wish to secede? If the answer is the latter, then Rajoy will invoke article 155, dissolve the Catalan government, and take over the regional government.
If any of this happens, it could disrupt the Spanish economy and send the euro tumbling. It could also set a precedence for regions in other countries that hope to throw off the yoke of their national government.
Employee Healthcare Deductibles Up 400% Between 2006 and 2017... The Kaiser Family Foundation reported that deductibles and co-insurance payments, up 89%, soared while wages rose just 31%.
What it means – Insurance premiums through the federal marketplace, often called Obamacare, will rise an average of 25% next year, but less than 10% of Americans get their insurance this way.
About half of Americans get insurance through their employers, where premiums didn’t rise as fast, but their policies have become less generous through higher deductibles and higher required co-insurance payments.
Next Week – The third week of October includes reports on industrial production, housing starts, and existing home sales.
The proof is in the planning.
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