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10/26/2016
Market Update

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U.S. consumer prices rose by 0.3% in September on the strength of energy and owners’ equivalent rent (the amount a homeowner would earn from renting his or her home in a competitive market); year-over-year prices accelerated to 1.5%, the highest level since October 2014. Prices excluding energy and food only increased by 0.1% for the month, but gained 2.2% from a year earlier.
This Week
  • U.S. consumer prices rose by 0.3% in September on the strength of energy and owners’ equivalent rent (the amount a homeowner would earn from renting his or her home in a competitive market); year-over-year prices accelerated to 1.5%, the highest level since October 2014. Prices excluding energy and food only increased by 0.1% for the month, but gained 2.2% from a year earlier.
  • Industrial production inched 0.1% higher in September after contracting in August. While mining showed strength, business equipment production declined for the second straight month and motor-vehicle production was flat following a solid summer. Year-over-year industrial production fell by 1%.
  • Housing starts fell by 9% in September, contracting for the second consecutive month on a drop in the highly temperamental multifamily housing component. However, builders received more permits, indicating that single-home residential construction (considered the most important component) is likely to rev up in the coming months. Meanwhile, existing-home sales — which account for the majority of U.S. home-buying activity — rose by 3.2% in September, reversing a two-month decline.
  • Homebuilder confidence dropped a notch in October but remained at the second highest level of the year; although builders reported shortages of labor and lots.
  • Mortgage purchase applications expanded by 3% in the week ending October 14, wiping out the prior week’s decline. However, refinancing applications slid by 1% for the same week, as mortgage rates reached the highest level since June.
  • Initial jobless claims climbed by 13,000 to 260,000 in the week ending October 15. Economists say the increase may be connected to Hurricane Matthew, which caused damage and flooding in the southeast U.S. The four-week moving average remained near a historically low level despite growing by 2,250 to 251,750 last week.
  • Consumer prices in the U.K. rose by 0.2% in September, as expected, bringing annual inflation to 1% — the highest reading since November 2014 (although still short of the Bank of England’s 2% target). Clothing and footwear prices saw the greatest increases, followed by restaurants and hotels, miscellaneous goods and services, and housing and utilities. Meanwhile, producer factory-gate and petroleum-product prices increased at an accelerated pace.
  • The European Central Bank held interest rates steady and made no changes to its asset-purchase program in October. Analysts believe the central bank’s December meeting could bring fresh monetary easing.
  • China’s gross domestic product expanded by 1.8% in the third quarter, with year-over-year growth at a flat 6.7%. The reading represented the weakest growth since 2009, but China remains on track to hit its 2016 full-year growth target of 6.5% to 7.0%. Annual growth in retail sales and industrial production was slow but steady, while recent surveys show stability in both manufacturing and services.

 

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