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

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