Stocks ended the week higher. At the beginning of the week there was concern about rising interest rates but the FED’s comments seemed to assure markets that the FED is still concerned about labor slack and they will keep short term rates low for a considerable time after completing their bond purchases in October. Furthermore, mixed economic data seemed to assure the markets that slow economic growth will postpone interest rate increases. However, I believe that longer term rates will creep higher based on the end of bond purchases nest month. The vast majority of FED members anticipate raising short term rates in 2015.
- The Federal Reserve reported that industrial production fell in August by 0.1%. Economists had forecast an increase of 0.3%. July’s increase was revised down to 0.2%. Exclding autos, factory output rose 0.1% in both July and August.
- The Labor Department reported that US Consumer Prices fell a seasonally adjusted 0.2% in August. Econonmists had been forcasting a 0.2% rise in prices. From a year ago the Consumer-Price index rose 1.7% below the FED’s target. Gasoline prices fell 4.1% in August and food prices rose 0.2%. Shelter costs rose 0.2% for the month and 2.9% from a year ago.
- Inflation adjusted weekly earnings rose 0.4% in August, The Labor Department reported. From a year ago, inflation adjusted weekly earnings rose only 0.4%.
- Eurostat reported that European inflation was unchanged in August and up only 0.4% for the year, slightly more than the 0.3% estimated.
- The Labor Department reported that initial claims for unemployment in the previous week fell 36,000 to 280,000. The four week moving average also fell to 299,500.
- The Commerce Department reported that housing starts fell 14.4% in August. This follows a 22.9% rise in July to a recovery high.