Industrial output fell again last month, slumping 0.2%, the Federal Reserve reports. Output has retreated in seven of the past eight months, marking the longest run of red ink since 2008 for the monthly comparisons of the nation’s industrial activity. The numbers don’t look much better for the year-over-year trend. Production is still rising in annual terms, but at the weakest rate since Dec. 2009, when output declined relative to the year-earlier level.
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Is the Federal Reserve having second thoughts about tightening monetary policy? Weak economic data in recent weeks certainly provide excuses to delay any plans to start raising interest rates. Comments from Fed officials over the past week have dispensed mixed signals on the outlook, although some policymakers say the reported divisions on monetary policy opinion are exaggerated, according to Reuters. Maybe, but the latest numbers on the US monetary base (M0) and the effective Fed funds rate suggest that the central bank is pulling back a bit from what appeared to be a clear shift towards tighter policy posture in recent months.
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● US jobless claims fall to 42-year low… again | MarketWatch
● Bloomberg’s US Consumer Comfort Index up For 4th week | Bloomberg
● Philly & NY Fed surveys show ongoing contraction in mfg in Oct | MarketWatch
● Fed policymakers downplay rate-hike divisions | Reuters
● US Federal debt at 7-year low | Time
● US debt ceiling deadline looms on Nov 3 | The Hill
● Eurozone inflation confirmed at negative rate in Sep | RTT
● Eurozone trade surplus falls more than expected in Aug | RTT

US industrial production is expected to be flat in tomorrow’s September report vs. the previous month, according to The Capital Spectator’s average point forecast for several econometric estimates. The average prediction for no change in last month’s output compares with a 0.4% decline in August.
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The ongoing decline in jobless claims looks too good to be true, and by some accounts that’s all that you need to know. The historical record tells us otherwise, but if the bullish signal embedded in the low number of new filings for unemployment benefits is misleading. as implied by Challenger’s estimate of rising job cuts, we’ll know soon enough. Meantime, the Labor Department reports that claims fell last week to a seasonally adjusted 255,000–the second time since July that claims have touched a 42-year low. Taken at face value, the numbers imply that the weak pace of growth in payrolls in recent months will soon perk up.
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Recession talk is on the rise lately, and for an obvious reason: the economic data has been weak. Yesterday’s monthly update on retail sales, for instance, reveals that spending in the US rose a tepid 0.1%. Soft data can be found in several other indicators, including industrial production, the ISM Manufacturing Index, and flat-to-slightly-negative growth in the US monetary base. (For an overview, see last month’s economic profile.) The markets are also pricing in higher macro risk, as I discussed earlier this week. It all adds up to a troubling environment that may be an early clue that the US is headed for a new recession. But there’s an alternative scenario: slow/sluggish growth that feels like a recession but doesn’t lead to the standard NBER-defined downturn.
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● US retail sales barely rose in September | MarketWatch
● US business inventories flat in Aug | Reuters
● US mortgage applications fall sharply after rule change | HousingWire
● Fed Beige Book: “Modest” US expansion at end of Q3 | WSJ
● Revised data for Japan’s industrial output hint at recession | MarketWatch
● Gold near 3-1/2-month high on bets for delay in Fed rate hike | Reuters

Today’s retail sales report for September offers more evidence that consumer spending is plodding along at a sluggish pace. The appetite for consumption has clearly downshifted in recent months, but it’s not obvious that spending is falling off a cliff into a recessionary hole when we look at the annual comparison.
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Rising uncertainty about the global economy continues to boost demand for US Treasuries. “It’s all a global growth fear trade,” Priya Misra, head of global rates strategy at TD Securities, tells Reuters. Expectations that China will continue to slow, coupled with forecasts of weaker growth in the US and Europe relative to recent projections, are inspiring new purchases of safe-haven Treasuries. Adding to the demand for safety and a hedge against more disinflation/deflation is the continued outlook for low inflation in the US and elsewhere.
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● US small business confidence up marginally in Sep | Reuters
● Redbook: US retail sales fall in 1st week of Oct | DJ
● Eurozone industrial output declined in August | Reuters
● China’s inflation rate eases to 1.6% YoY in Sep | RTT
● UK jobless rate falls in report for August | RTT
● China’s Q3 GDP growth expected to slow to 6.8% YoY | Reuters