With the government shutdown at the forefront of headlines during the first half of October, U.S. economic data appeared to trend in a mostly negative direction for much of the month, according to McGladrey, the Chicago-based tax, consulting and assurance company with a large presence in Fairfield County.
The Citigroup Economic Surprise index (CESI) traced noticeably higher during Q3, but sharply reversed in early October. The index touched negative territory in the final days of the month, marking the first negative print since July 30. Consumer psyches, as measured by the Consumer Confidence (CCI) and Consumer Sentiment (CSI) indexes, followed suit, trending down in the month. The CCI dropped nine points (80.2 to 71.2), marking the largest month-over-month decline since February 2010. The CSI also fell, albeit not as dramatically, from 77.5 to 73.2. The considerable decline in consumer sentiment was largely associated with the government shutdown that stretched on for more than two weeks, according to McGladrey.
On a more positive front, the ISM Manufacturing index continued to rise, increasing from 56.2 to 56.4. The last time the index was above 56 was April 2011. This is even more impressive as expectations were calling for a drop to 55, McGladrey said. The service sector followed suit as the ISM non-manufacturing index rose to 55.4 from 54.4. This exceeded expectations as the index was expected to decline to 54.0. This is a more robust measure of the US economic growth as the service sector makes up an overwhelming majority of GDP. Other positive news came from the labor and housing markets.
The delayed September unemployment rate came in lower at 7.2 percent (previously 7.3 percent) while adding just 148,000 jobs. Despite coming in below expectations, many market participants viewed this result positively as it increased the probability that the Federal Reserve will continue its bond-purchasing program. The housing market continues its climb as housing prices increased once again in the month of August. The S&P/Case-Shiller 20-city home price index rose 12.8 percent over the trailing 12 months. This marks the fastest yearly price increase since February 2006. It is worth noting that price appreciation eased in many cities from July, McGladrey reported. With mortgage rates climbing higher and housing prices appreciating at a rate not seen since pre-2008, talks of a peaking housing market are beginning to make their way to the forefront of financial headlines. Other positive news came from the labor and housing markets, according to McGladrey. The delayed September unemployment rate came in lower at 7.2 percent (previously 7.3 percent) while adding just 148,000 jobs. Despite coming in below expectations, many market participants viewed this result positively as it increased the probability that the Federal Reserve will continue its bond-purchasing program.
The housing market continues its climb as housing prices increased once again in the month of August. The S&P/Case-Shiller 20-city home price index rose 12.8 percent over the trailing 12 months. This marks the fastest yearly price increase since February 2006. It is worth noting, McGladrey said, that price appreciation eased in many cities from July. With mortgage rates climbing higher and housing prices appreciating at a rate not seen since pre-2008, talks of a peaking housing market are beginning to make their way to the forefront of financial headlines.
Note: An earlier version of the article appeared online Nov. 19.
