Evelyn Reynolds

Retail sales increased a seasonally adjusted 0.4% on the month, up from the unrevised 0.1% gain in August and better than the 0.3% Dow Jones forecast.
Initial unemployment claim filings totaled a seasonally adjusted 241,000, a decline of 19,000 and lower than the estimate for 260,000.

Consumer spending held up in September, underscoring a resilient economy that is now getting a boost from the Federal Reserve, the Commerce Department reported Thursday.
Retail sales increased a seasonally adjusted 0.4% on the month, up from the unrevised 0.1% gain in August and better than the 0.3% Dow Jones forecast, according to the advanced report.

Excluding autos, sales accelerated 0.5%, better than the forecast for just a 0.1% rise. The numbers are adjusted for seasonal factors but not inflation, which rose 0.2% on the month as measured by the consumer price index.
In other economic news Thursday, initial unemployment claim filings totaled a seasonally adjusted 241,000, a decline of 19,000 and lower than the estimate for 260,000, the Labor Department reported.
Claims declined even following hurricanes Helene and Milton, which tore through the Southeast in recent weeks exacting tens of billions of dollars in damages. Filings in both Florida and North Carolina declined after jumping the previous week, according to unadjusted data.
Stock market futures were higher after the reports while Treasury yields also rose.
Together, the reports show that consumers, who power about two-thirds of all economic activity in the U.S., are still spending and the labor market is holding up after signs of weakening through the summer.

On the retail side, spending grew at miscellaneous store retailers, which showed an increase of 4%, as well as at clothing stores (1.5%) and bars and restaurants (1%). Those increases offset a 1.6% drop at gas stations as fuel prices fell, along with declines at electronics and appliances stores (-3.3%) and furniture and home furnishing businesses (-1.4%).
Sales increased 1.7% from a year ago, compared to the CPI rate of 2.4% for the same period.
The data comes from a month where the Fed cut its benchmark borrowing rate by a half percentage point and indicated more moves lower are likely this year and through 2025.
Policymakers have expressed confidence that inflation is on a glide path back to the Fed’s 2% target. However, they have expressed concern that the labor market is softening even with strong September payrolls growth and weekly claims that have stayed fairly in line after jumping due to the storm effects.
The European Central Bank on Thursday cut its key deposit rate by a quarter point, also expressing confidence in inflation along with concerns about a broader economic slowdown.
Despite the decline in initial filings, continuing claims, which run a week behind, edged higher to 1.867 million. Along with the declines in storm-ravaged Florida and North Carolina, claims decreased by an unadjusted 7,812 in Michigan, which had been hit by the Boeing strike.
The Philadelphia Fed also reported Thursday that its index of manufacturing activity rose to 10.3 for October, representing the difference between companies seeing expansion against contraction. The reading, up from September’s 1.3, was better than the estimate for 3.0. More

Inflation in the U.K. dropped sharply to 1.7% in September, the Office for National Statistics said Wednesday, beating expectations for a fall to 1.9% from 2.2% in August.
Core inflation, excluding the volatile impact of energy, food, alcohol and tobacco, came in at 3.2% for the month, down from 3.6% in August and below the 3.4% forecast of a Reuters poll.
The British pound fell against the U.S. dollar and euro following the cooler-than-forecast print as economists said a November rate cut from the Bank of England looked more likely.

A wet Piccadilly Circus during a rainy morning in the West End, on 26th September 2024, in London, England. 
Richard Baker | In Pictures | Getty Images

LONDON — Inflation in the U.K. dropped sharply to 1.7% in September, the Office for National Statistics said Wednesday, ramping up market expectations for a Bank of England rate cut in November.
Economists polled by Reuters had expected the headline rate to come in at a higher 1.9% for the month, in the first dip below the BOE’s 2% target since April 2021.

Inflation has been hovering around that level for the last four months, and came in at 2.2% in August.

Core inflation, which excludes energy, food, alcohol and tobacco, came in at 3.2% for the month, down from 3.6% in August and below the 3.4% forecast of a Reuters poll.
Price rises in the services sector, the dominant portion of the U.K. economy, eased significantly to 4.9% last month from 5.6% in August, now hitting its lowest rate since May 2022.
Core and services inflation are key watch points for Bank of England policymakers as they mull whether to cut interest rates again at their November meeting.

Cuts ahead?

Money market pricing for a 25-basis-point November rate cut jumped from 80% to 92% following the latest inflation print, with a follow-up trim in December nearly fully priced in. Analysts had on Tuesday said lower wage growth reported by the ONS this week supported the case for a rate cut.

Two more quarter-percentage-point reductions this year would take the BOE’s key rate to 4.5%, after the central bank kicked off rate cuts in August, then held in September.
A fall in the British pound following the publication on Wednesday reflected more dovish expectations for the BOE, with sterling down 0.6% against the U.S. dollar at $1.299, falling below the $1.3 level for the first time since Sept. 11. The British currency moved 0.5% lower against the euro.
The yields on British government bonds, known as gilts, meanwhile dropped across the board. Two-year gilt yields fell 9 basis points as the 10-year gilt yield fell 7 basis points.

Stock chart icon

British pound versus U.S. dollar.

Headline U.K. inflation has eased from a peak of 11.1% in October 2022 to September’s 1.7%.
“These figures provide reassurance that the U.K. has moved into a more moderate inflation environment, aided by lower fuel prices,” Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in a note, with the “notable drop” in services inflation indicating “underlying price pressures are becoming less sticky.”
Thiru nevertheless added that British inflation could reverse its decline in October because of an increase in the regulator-set energy price cap, while the BOE will wait to assess the U.K. Labour government’s keenly-awaited debut budget at the end of the month for any potential inflationary impact before locking in a course.

Capital Economics’ Chief U.K. Economist Paul Dales was similarly cautious, pointing out that a large part of the unexpected weakness in core and services inflation was due to a big fall in airfares price rises. The BOE is slightly more likely to stick to 25-basis-point cuts at every other meeting as a result, Dales said, even if the chance of two more reductions this year has now gone up.
“We still think rates will eventually fall to 3.00%, which is lower than the 3.50-3.75% priced into the market,” he said.
However, Deutsche Bank’s Chief U.K. Economist Sanjay Raja said the inflation figures would be “music to the [Monetary Policy Committee’s] ears” and could lead them to consider a faster unwinding of restrictive policy, including sequential rate cuts.
Raja also noted the risk presented by the budget, which he said was “likely to be expansionary despite the scale of fiscal consolidation coming on 30 October.” More