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MANUFACTURING & PRODUCTION

• The manufacturing economy expanded for the second straight month as the ISM’s PMI registered 52.6% in September. New orders, production and order backlog gauges were positive, but employment stayed weak and the price paid component remained elevated.
• Industrial production advanced 0.7% in September following an upwardly revised gain of 1.2% in August. Factory output rose 0.9% led by continued improvement in primary metal and motor vehicle production. Mining output expanded 0.7% while utilities production decreased 0.7%. The capacity utilization rate improved from 69.9% in August to 70.5% for September.

PRICES

• The Consumer Price Index increased 0.2% in September. For the month, food prices fell 0.1% while energy prices advanced 0.6%. Excluding food and energy, core CPI increased 0.2%. Year over year, CPI declined 1.3% and core CPI rose 1.5%.
• Wholesale prices for finished goods dropped 0.6% for the month as food prices declined 0.1% and energy prices plunged 2.4%. Core PPI was 0.1% lower. Over the past 12 months, the Producer Price Index has fallen 4.8%.
• The U.S. Import Price Index rose a modest 0.1% in September following a 1.6% increase the prior month. The 0.6% rise in nonfuel import prices was offset by a 1.8% decline in prices of fuel imports. Export prices fell 0.3% for the month.

SALES

• Retail sales fell 1.5% from August to September as post-clunker auto sector sales hit a speed bump, dropping 10.4%. Excluding auto, retail sales rose 0.5% for the month; further excluding the 1.1% gain in gas station sales, retail sales increased a moderate 0.4%. Home improvement store sales declined 0.2%; sales at electronics & appliance stores were flat; and furniture & furnishings store sales increased 1.4%. Grocery store sales were up 0.9%, while clothing stores had sales 0.5% higher for the month; department store sales rose 0.4%.

LABOR MARKETS

• Labor markets yielded more of the same, as nonfarm payrolls declined by 263,000 in September. On the goods-producing side of the economy, the largest losses were 64,000 jobs from construction and 51,000 positions shed from the manufacturing industry. Within the service economy, government payrolls fell by 53,000 and retail trade employment decreased by 38,500. The health care industry added 19,200 jobs in September.
• Average hourly earnings for production and nonsupervisory workers increased 2.6% over the past 12 months; however, because of declines in the average workweek, the average weekly earnings for that group have risen only 0.8%.
• The unemployment rate continued to creep higher, rising from 9.7% in August to 9.8% for September.

THE FEDERAL RESERVE

• Overall, the October Beige Book reported a mixture of modest improvement or stabilization across many of economic sectors. Within the Fourth District, activity was generally noted as sluggish. Manufacturing activity was flat to slightly improving. Sales of new homes improved modestly, but commercial and industrial construction activity remained soft. Banks reported weak commercial loan demand and consumer loan activity was described as flat to down.