The holiday shortened week provided data relating to current consumer behavior. On Thursday, Retail Sales showed an increase of 0.4% month-over-month, while the Retail Sales Control Group surprised with a 0.7% month-over-month increase over the 0.3% consensus estimate. The Control Group is a subset of the broader Retail Sales data which excludes certain categories that are more acutely affected by seasonality or volatility, giving a more stable assessment of sales. Control Group sales data is factored into the government’s calculation for Gross Domestic Product (GDP). The recent upward trend in the value of retail purchases indicates continued economic growth for the start of the fourth quarter of 2024 as the resilient consumer drives growth. However, the increase in sales for items at general merchandise retailers could also indicate the price per item has risen. Apparel, grocery stores, and miscellaneous store retailers led the advance, while gas station sales fell reflecting lower gas prices. The single largest category in Retail Sales, new and used vehicle and parts dealers, remained unchanged in September.
Strong consumer demand continues to be propelled by a robust labor market. This week, Initial Jobless Claims were slightly lower, at 241,000, than the expected 259,000, while Continuing Claims were in-line with the consensus estimate at 1,867,000. The data was likely skewed by severe weather as Hurricanes Milton and Helene caused major disruptions in the southeastern states. Weekly labor data will likely remain volatile in the near-term as recovery efforts continue.
Mortgage applications fell -17% from the prior week marking a third consecutive week of decline. The decline in applications is likely related to the recent rise in mortgage rates as the average 30-year fixed rate rose to 6.52% versus 6.36% in the prior week. Other housing data showed more slowing as Housing Starts declined more than expected. For September, Housing Starts were down -0.5% month-over-month after an increase of 7.8% in August. The decline can be attributed to a drop in multi-family housing projects which declined -9.4% month-over-month marking the second consecutive monthly decline. Single-family starts mitigated the decline as they increased 2.7% month-over-month in September.
The yield curve remained relatively unchanged for the week as the 2-year US Treasury was unchanged for the week at 3.95%, while the 10-year US Treasury was at 4.07% as of writing versus 4.08% last week. The 2yr/10yr spread remained in positive territory at 11.2 basis points; however, the 2yr/5yr spread remained inverted at -7.8 basis points.
Next week: Leading Economic Index (LEI), Existing Home Sales, Federal Reserve Releases Beige Book, Chicago Fed National Activity Index (CFNAI), S&P Global US Manufacturing Purchasing Managers’ Index (PMI), S&P Global US Services PMI, New Home Sales, Durable Goods Orders, University of Michigan Consumer Sentiment
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