Macro Report

Week’s Takeaway:
This week’s industrial and housing data came in mixed but mostly lower as hurricane effects impact activity in the southern region and the lag on lower borrowing rates has yet to kick in.

Notes:
September’s Industrial Production was down -0.3%, a sharper decline than the market expected -0.1% and following a downwardly revised 0.3% increase in August. Capacity utilization was also lower, printing down 0.3% to 77.5%, below the estimate for a slight uptick to 77.9%. Manufacturing production declined -0.4%, coming in below the expected -0.1% decrease.

We also received the first round of October FED Manufacturing Surveys which provided vastly different pictures. Empire (NY) came in at -11.9, well below the expected 3.6, while Philadelphia printed up 10.3, well above expectations of a modest 3 increase.

The first batch of September housing data printed lower, but mostly came in line with expectations (when accounting for the potential impact of Hurricane Helene). Housing starts printed down -0.5%, just below the expected -0.4%, while Building permits were down -2.9% versus the expected -0.7% move. On the permits side, the entire “miss” versus expectations can be explained by the -50k move in the South region.

Interestingly, after last week’s worse than expected surge in initial jobless claims, this week’s figure came in well below expectations of another 259k claims, printing down to 241k. While this number could rise again next week, (the period surveyed encompasses the time between Hurricane’s Helene & Milton) it is an encouraging signal that the labor market is in fact more stable the last week’s surprise data initially suggested. Continuing jobless claims ticked higher to 1,867k from 1,861k.

Finally, on the inflation side, the NY FED 1yr Inflation Expectations index was unchanged at 3% in September. It has spent most of the year holding at this slightly elevated level and has failed to push well below 3% since November 2020.

Next Week’s Notes:
Next week, we will receive data from the manufacturing and housing sectors, along with key macroeconomic indicators that will provide insights into the demand for steel and the overall economic outlook.

In the manufacturing sector, we will see two more of the five October Fed Manufacturing Surveys: the Richmond and Kansas City indexes, along with preliminary results for the October S&P Global US Manufacturing PMI. Additionally, preliminary results for September’s Durable Goods Orders are expected to show a decline of -1.0% from a flat reading in August, while Durables Ex Transportation is forecasted to dip by -0.1%, which would be down from a 0.5% increase in the prior month.

In housing, Existing Home Sales for October are anticipated to rise to 3.90m from 3.86m in September. Meanwhile, New Home Sales are projected to slightly decline to 713k in September from 716k the previous month.

On the macroeconomic front, the final results for October’s University of Michigan consumer surveys will be published, with the Sentiment Index expected to tick up to 69.5 from the initial 68.9. We will also get the weekly updates on Initial and Continuing Jobless Claims, as well as the Chicago Fed National Activity Index for September. These indicators will provide insights into labor market conditions in the wake of the recent hurricanes and offer a gauge of overall economic activity and inflationary pressures.