The Federal Reserve’s monetary policy committee provided little guidance on when it might begin tapering other than to say it wouldn’t be now. The announcement noted the recent slowing of the housing recovery and confirmed again that the unemployment rate would need to be closer to 6.5% before the Fed would begin raising interest rates.
Home prices continued to rise in August, seeing their biggest year-over-year gains (nearly 13%) since early 2006, according to the S&P/Case-Shiller 20-City Composite Index. However, the pace of those gains has begun to slow over the last several months, and August’s 1.3% increase was the smallest gain of any month since March. Average home prices are back to mid-2004 levels, but are still roughly 20% below their mid-2006 peaks.
Increases in the cost of energy and housing pushed consumer prices up 0.2% in September, according to the Bureau of Labor Statistics. That put the inflation rate for the past 12 months at 1.2%, its lowest level in almost 3 years. Wholesale prices fell 0.1% during the month, leaving wholesale inflation for the last 12 months at a paltry 0.3%.
A 2.2% decline in auto sales cut retail sales by 0.1% in September, according to the Commerce Department. However, non-auto sales were up 0.4%, and total sales were still 3.2% higher than a year earlier.
The Institute for Supply Management’s gauge of U.S. manufacturing saw little change in October, rising just 0.2% from October’s 56.2%. However, the reading still represents the index’s highest level so far this year.
And the hits keep coming: Mortgage lender Fannie Mae filed suit against nine of the world’s largest banks, charging that it had lost $800 million because the banks had deliberately manipulated the London Interbank Offered Rate (Libor), which determines a variety of interest rates around the world. Bank of America, JPMorgan Chase, and Citigroup were named in the suit along with international institutions Barclays, UBS, Deutsche Bank, Credit Suisse, the Royal Bank of Scotland, Rabobank, and the British Bankers’ Association.
Eye on the Week Ahead
Data on U.S. economic growth in the third quarter will finally be available, and investors will see whether the federal government shutdown affected the October unemployment rate. Also, the European Central Bank meets on interest rates and will announce its decision on Thursday.
Key dates and data releases: factory orders (11/4); U.S. services sector (11/5); initial estimate of Q3 gross domestic product, European Central Bank monetary policy announcement (11/7); unemployment/payrolls, personal incomes/spending (11/8).
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Article courtesy of Financial Advisor, Dempster Cherry of Sage Point Financial. To find out more click here
