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Bob Carey
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  US Economy and Credit Markets Ended Oct. 21, 2016
Posted Under: Weekly Market Commentary
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The yield curve flattened last week as the short-end of the curve was bid up amid increasing expectations of an interest rate increase occurring in December of this year. Generally, a flattening yield curve is viewed as indicative of weaker economic conditions. The yield curve has been broadly flattening since the end of 2013 but has sharply steepened since the end of August. Monday's Industrial Production reading registered a 0.1% increase in September which was in-line with expectations. This represents a reading 1% lower on a year-over-year (y-o-y) basis as commodity weakness has negatively impacted production figures. Tuesday saw the Consumer Price Index increase 0.3% in September, in-line with expectations, and increase 1.5% on a y-o-y basis. Higher energy prices were the primary driver behind the increase. The "core" CPI (excludes food and energy) is up 2.2% y-o-y and increased 0.1% in September. September housing starts were reported last Wednesday and saw a decline of 9% from the prior month and a decline of 11.9% versus the prior year. These were below expectations and were driven by a drop in multi-family starts as single-family starts actually increased over the period. Following this, on Thursday, existing home sales rose 3.2% in September driven by improving first-time home buyer demand. Major economic reports (and related consensus forecasts) for the upcoming week include: Tuesday: October Consumer Confidence Index (101, -3.1); Tuesday: Prior week MBA Mortgage Applications and September New Home Sales (600K, -9K); Wednesday: Prior week Initial Jobless Claims (255K, -5K); Thursday: 3Q GDP Annualized QoQ (2.5%, +1.1%) and October University of Michigan Sentiment (88.2, +.3).
Posted on Monday, October 24, 2016 @ 8:05 AM • Post Link Share: 
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