Market and economic update: U.S. economic data points to solid growth

U.S. economic data appears to support solid growth into the new year. Data reported last week consisted of weaker September retail sales (negative 0.3%) joined by stronger consumer sentiment (preliminary October University of Michigan consumer sentiment up 1.8 points to 86.4), improving September industrial production (1%), and weekly initial jobless claims that reached their lowest level in 14 years (264,000).

Inflation is likely to remain under pressure, with oil prices dropping by double digits this year. The drop in energy prices should provide some support to the consumer in the fourth quarter, mitigating some of the erosion in confidence that can be driven by a weaker stock market. The U.S. economy remains on pace to average 3% growth in coming quarters, despite the recent market volatility and risks from a slowdown in eurozone economic growth.

Economic data for Europe and Japan point to weaker economic activity. Industrial production for August fell 1.8% in Europe and 1.9% in Japan, moving industrial activity for both economies into contraction. Prices also slipped in Europe with consumer price inflation slowing to a year-over-year growth rate of just 0.3% in Europe, well below the European Central Bank (ECB) target of nearly 2%. Both Europe and Japan are at risk for further slowing in activity unless monetary or fiscal policies are enacted to improve growth.



Inflation for India and China continues to weaken. September consumer prices in India grew 6.6%, down 1.2% from August, and wholesale prices rose just 2.4% versus 3.7% last month. In China, the Consumer Price Index (CPI) rose 1.6% versus 2% a month ago and price pressures seem likely to continue with weaker money supply growth and weaker loan growth. Economic growth in both economies continues to moderate at relatively high levels when compared to growth in developed economies.

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Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for investment.

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