The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to decelerate to a +0.11 reading in the October update that’s scheduled for release on Monday (Nov. 24), based on The Capital Spectator’s median econometric point forecast for several econometric estimates. The projection is moderately below the +0.25 value for September, which reflected above-average economic growth for the US relative to the historical trend. Only 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 October as a guide, CFNAI’s three-month average is expected to remain at a level that’s historically associated with growth at an above-trend pace.
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In the horse race among the major asset classes, there’s not much competition for first place at the moment. US REITs remain in the lead for the trailing one-year period (250 trading days), and by a wide margin, based on our standard list of ETF proxies for the key slices of global markets. In other words, US stocks have been demoted recently to second place,  and by more than a trivial degree. Vanguard Total Stock Market ETF (VTI), which tracks a broad measure of US equities, is still sitting on a handsome gain for the past year (+15.0%), but it’s well below the 24% surge for Vanguard REIT ETF (VNQ).
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Paul Krugman seems to be having a supply-side-economics moment… sort of. Raising taxes, the NY Times columnist and Nobel laureate has been arguing lately, threatens Japan’s fragile economic recovery. “Shinzo Abe is doing the right thing, seeking to delay the next rise in consumption taxes,” Krugman wrote on his blog yesterday. “This is good economic policy….”
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● US Leading Economic Index Increased Again In October | Conference Board
● US October consumer prices flat; core CPI up 0.2% | USA Today
● Eurozone Nov Flash Consumer Confidence Falls Unexpectedly | RTT
● UKIP, Populist Anti-E.U. Party, Wins 2nd Seat in Britain’s Parliament | NY Times
● Obama declares ‘lawful action’ to protect 5M immigrants | USA Today
● Japan PM seeks referendum on ‘Abenomics’ in snap election | Reuters

The first hint that the global economy’s recent weakness is creeping into the US arrived in today’s preliminary November update of the Markit US Manufacturing Purchasing Managers Index (PMI). This survey of business conditions in the manufacturing sector reflected slower growth for this month’s flash estimate. Dipping to 54.7, the PMI’s slide — the third monthly decline in a row — shows that manufacturing activity in the US increased this month at the slowest pace since January.
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New filings for unemployment benefits fell 2,000 to a seasonally adjusted 291,000 for the week through November 15, the Labor Department reports. It’s a relatively minor change, but today’s update provides more evidence that the broad slide in jobless claims rolls on. The latest reading remains close to the 14-year low of 266,000 for the week through October 11, 2014. Stepping back and looking at the historical record, claims are near the lowest levels recorded over the last 40 years. Suffice to say, this leading indicator for the labor market—and for the economy generally—continues to flash a bullish signal.
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The outlook for the global economy is suffering these days, but there’s still no clear sign that the deceleration in macro activity has infected the US. Based on the latest numbers for October, the broad trend for the US remains distinctly positive. A diversified mix of economic and financial indicators continues to reflect growth through last month. But there are clouds on the horizon. Stagnation in Europe, recession in Japan, and slowing growth in China collectively pose a threat to America’s positive momentum — a threat that may take a bite out of US activity at some point. But for the moment, the numbers for the US overall reflect a clear bias for expansion.
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● Flash Germany PMI: growth drops to 16-month low in Nov | Markit
● November flash PMI signals weakest eurozone growth for 16 months | Markit
● Flash China Manufacturing PMI Flat In Nov At 6-month low | Markit
● Japan Flash Manufacturing PMI shows moderate growth in November | Markit
● US Stocks Decline as Fed Minutes Show Concern on Deflation | Bloomberg
● Oil & gold price plunge doesn’t signal global recession, experts say | The Guardian

The pace of new residential housing construction slumped last month, dipping to 1.009 million units (annualized) in October — down nearly 3% from September’s total, the US Census Bureau reports. Newly issued building permits, on the other hand, perked up by nearly 5%, offering a brighter outlook for the near term. Yesterday’s encouraging update on the mood in the home building industry for November lends support for seeing today’s soft data on housing starts as a temporary affair. “Growing confidence among consumers is what’s fueling this optimism among builders,” said David Crowe, chief economist at the National Association of Home Builders (NAHB). Even so, the outlook for growth in housing generally remains modest at best, as implied by the ongoing deceleration in the year-over-year trends for both starts and permits.
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New York Fed President William Dudley is inclined to ignore the recent drop in inflation forecasts via the Treasury market. In a speech last week, he explained that “in assessing inflation expectations, I currently put more weight on survey-based measures of inflation expectations as opposed to market-based measures.” The distinction is more than academic. “Survey-based measures have been generally stable, consistent with inflation expectations remaining well-anchored,” he noted. Market-based estimates, however, tell a different story.
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