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

US retail sales are expected to increase 0.1% 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 reflects a slight deceleration in growth after the previous month’s sluggish 0.2% rise.
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Mr. Market’s cautious outlook of late is less acute at the moment relative to recent history, but it’s not obvious that all’s well. True, the US Stock Market Crash Risk Index is less threatening and a markets-based estimate of US business cycle risk has pulled back after briefly spiking higher in late-August and early September. Does that mean that it’s safe to go swimming in risky waters again? Maybe, but only for investors who: 1) can tolerate a fairly high degree of loss if they’re wrong and 2) are comfortable with a high-risk strategy of attempting to be early. For everyone else—particularly for “conservative” investors—the outlook is still sufficiently hazardous to remain cautious until a more convincing round of risk-on signals emerge.
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● China’s imports and exports slump in September| Bloomberg
● Germany’s ZEW survey: investor confidence falls to 1yr low in Oct | Bloomberg
● India’s industrial output in Aug rose at fastest pace in nearly 3yrs | WSJ
● German inflation slips back to zero in September | RTE
● UK inflaition goes slightly negative in September | MarketWatch
● Angus Deaton wins Nobel in economics for studying consumption | Reuters

Stocks in emerging markets posted their best weekly gain in nearly four years last week. Analysts are divided over whether this is a dead-cat bounce or the start of an enduring mean-reversion trade in the wake of nearly non-stop declines since last-April. From the perspective of the week just passed, however, there’s no doubt that equity markets in so-called emerging countries enjoyed a powerful rally for the five days of trading through Oct. 9.
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● US import prices fell less than expected in September | RTT
● US wholesale invetories up slightly in August | Reuters
● Money outflows from emerging markets threaten global economy | NY Times
● US NABE Outlook Survey: 2.5% to 2.8% Growth through 2016 | MNI
● Gold at 7-week high as doubts about Fed rate hike persist | Bloomberg

● The Courage to Act: A Memoir of a Crisis and Its Aftermath
By Ben S. Bernanke
Review via The New York Times (Michael Kinsley)
Yes, the book is a bit of a slog, but it is undoubtedly the best account we will ever have of how government and financial institutions dealt with what has come to be known as the Great Recession. It’s an odd term, isn’t it? It invokes comparisons to the Great Depression and simultaneously suggests that: “Shucks, it wasn’t all that great. Wasn’t a depression or anything.” But Bernanke is persuasive in arguing that (a) it was pretty damned great (i.e., terrible) and (b) he and his colleagues at the Fed deserve credit for the fact that it wasn’t a heck of a lot greater.
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There may be a rate hike around the next bend in the calendar after all. Or maybe not. Like the possibility of rain next Tuesday or peace in the Middle East over the next 50 years, you can’t rule anything out. Ruling it in isn’t a slam-dunk, but today’s lineup of Fed officials on the media-go-round want you to know that tighter monetary policy before the year is out isn’t impossible.
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