The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to tick higher in the September update that’s scheduled for tomorrow (Oct. 22), based on The Capital Spectator’s average point forecast for several econometric estimates. The projection for +0.05 is slightly above August’s +0.01 reading, which reflects US economic activity that’s close to the historical trend rate of growth. Only negative values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s estimate for September as a guide, CFNAI’s three-month average is expected to reflect an expansion that’s slightly above the historical trend and therefore well above the tipping point that marks the start of a new US recession.
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Deutsche Bank’s chief international economist advises that the US isn’t tipping into a recession. “There is a big disconnect between the current narrative in both equity and rates markets and the actual economic data,” he says via Bloomberg. “This economy is stronger than its reputation and for some reason many investors want to hold onto the 2009 story of ‘the economy is not good’ “.
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● US housing starts rise in September, near 8-year high | MarketWatch
● GDPNow model Q3 growth estimate unchanged at 0.9% | Atlanta Fed
● Redbook: US retail sales fall in first half of Oct vs Sep | DJ
● DB’s Sløk says US not entering recession | Bloomberg
● ECB faces obstacles for accelerating QE | Bloomberg
● Japan’s export growth slows on lower demand from China | MNI

US residential construction, driven by a surge in new multi-family projects, increased by a solid 6.5% in September, the Census Bureau reports. The rise beat forecasts and signals that the housing market remained on a recovery track. At the same time, newly issued building permits dipped 5% last month, suggesting that the housing market’s growth will remain moderate.
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The on-again-off-again economic recovery is having a tough time convincing the crowd to price in higher US Treasury yields, but maybe political gridlock in Washington can push rates higher. In fact, some of the short maturity Treasuries that are thought to be at risk of not being repaid because of debt-ceiling uncertainty have endured selling to the point that their yields have shot up to two-year highs, according to The Wall Street Journal. Dysfunctional politics in Washington is old news, but perhaps there’s a new if not-entirely intentional byproduct: higher rates.
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● US homebuilder confidence rises to 10yr high in Oct | The Atlantic
● SF Fed President Williams sees case for US rate hike soon | Bloomberg
● Treasury Secretary Lew is worried about Nov. 3 debt ceiling deadline | CNBC
● T-bill yields rise to 2-Year high on debt-ceiling worries | WSJ
● Lending standards continue to ease in Eurozone | RTE
● Germany’s deflation in factory prices rolls on in Sep | MarketWatch
● Trudeau’s election as PM leads Liberals back to power in Canada | BBC

Housing starts are expected to rise modestly to 1.147 million units (seasonally adjusted annual rate) in tomorrow’s September update, according to The Capital Spectator’s average point forecast for several econometric estimates. The projection represents an increase from 1.126 million units in the previous month’s report for residential construction activity.
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Last week delivered another positive run for most of the world’s risky assets. Although the gains were relatively modest vs. the weekly surge through Oct. 9, the generally bullish bias for the five trading days through Oct. 16 marks a second week of higher prices for the major asset classes, based on a set of representative ETFs.
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● US industrial output falls for second month in September | RTT
● US Consumer Sentiment rises more than expected in October | RTT
● China GDP growth dips to 6.9% in Q3, slowest since 2009 | Bloomberg
● China’s industrial production growth slower than forecast in Sep | Investing.com
● US federal debt ceiling deadline on Nov 3 worries investors | P&I

● Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe
By Greg Ip
Summary via publisher (Hachette/Little, Brown)
How the very things we create to protect ourselves, like money market funds or anti-lock brakes, end up being the biggest threats to our safety and wellbeing. We have learned a staggering amount about human nature and disaster — yet we keep having car crashes, floods, and financial crises. Partly this is because the success we have at making life safer enables us to take bigger risks. As our cities, transport systems, and financial markets become more interconnected and complex, so does the potential for catastrophe. How do we stay safe? Should we? What if our attempts are exposing us even more to the very risks we are avoiding? Would acceptance of danger make us more secure? Is there such a thing as foolproof? In Foolproof, Greg Ip presents a macro theory of human nature and disaster that explains how we can keep ourselves safe in our increasingly dangerous world.
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